Chapter 14

 

This question asks you to calculate the welfare effects of an export tax in the small country case.
1.




Graph the following curves by clicking here
a.

Label the vertical axis "P" and the horizontal axis "Q."
b.

Draw a demand curve, labeling it "D."
c. Draw a supply curve, labeling it "S."
d.
Suppose this country is an exporter of this product, and the current international price is $900. Draw a horizontal line representing this price and label it "P1."
e. Suppose the quantities supplied and demanded at this price are 80,000 and 20,000 respectively. Mark these quantities on the horizontal axis.
f. Now suppose this country imposes an export tax that causes the domestic price to fall to $800. Draw another horizontal line representing this price and label it "P2."

g.

Suppose the quantities supplied and demanded at this price are 60,000 and 40,000 respectively. Mark these quantities on the horizontal axis.
h. Calculate the gain in consumer surplus.

i. Calculate the loss in producer surplus.

j. Calculate the gain in government revenue.

k.

Calculate deadweight loss.
l.

Can a small country increase its total welfare by imposing an export tax? Explain.
View graphing answers to question 1 by clicking
  View text answers to question 1 by clicking




Copyright ©2001 The McGraw-Hill Companies.
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of the The McGraw-Hill Companies.