3. Welfare effects of a tariff in a small country Suppose Honduras is open to free trade in the world market for soybean

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3. Welfare effects of a tariff in a small country Suppose Honduras is open to free trade in the world market for soybeans. Because of Honduras's small size, the demand for and supply of soybeans in Honduras do not affect the world price. The following graph shows the domestic soybeans market in Honduras. The world price of soybeans is Pw = $400 per ton. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS). 1200 Domestic Demand Domestic Supply 1100 1000 900 800 700 600 500 400 300 200 PRICE (Dollars per ton) 0 20 40 60 80 100 120 140 QUANTITY (Tons of soybeans) PW 160 180 200 PS
If Honduras allows international trade in the market for soybeans, it will import 120 tons of soybeans. Now suppose the Honduran government decides to impose a tariff of $200 on each imported ton of soybeans. After the tariff, the price Honduran consumers pay for a ton of soybeans is $ and Honduras will import tons of soybeans. Show the effects of the $200 tariff on the following graph. Use the black line (plus symbol) to indicate the world price plus the tariff. Then, use the green points (triangle symbols) to show the consumer surplus with the tariff and the purple triangle (diamond symbols) to show the producer surplus with the tariff. Lastly, use the orange quadrilateral (square symbols) to shade the area representing government revenue received from the tariff and the tan points (rectangle symbols) to shade the areas representing deadweight loss (DWL) caused by the tariff. (? 1200 Domestic Demand Domestic Supply 1100 World Price Plus Tariff 1000 900 800 CS 700 600 PS 500 400 Government Revenue 300 200 DWL PRICE (Dollars per ton) 0 20 40 60 80 100 120 140 QUANTITY (Tons of soybeans) P W 160 180 200
World Price Plus Tariff 1000 900 800 700 600 500 P 400 300 200 0 20 40 60 80 100 120 140 160 180 200 QUANTITY (Tons of soybeans) Complete the following table to summarize your results from the previous two graphs. Under Free Trade (Dollars) Under a Tariff (Dollars) Consumer Surplus Producer Surplus Government Revenue 0 Based on your analysis, as a result of the tariff, Honduras's consumer surplus and the government collects $ by PRICE (Dollars perton) +*+K|4= CS PS Government Revenue DWL by $ producer surplus in revenue. Therefore, the net welfare effect is a of