i. What is the free trade equilibrium price, output and exports? How does the Home export subsidy affect domestic price, the world price and Home exports (a numerical answer is expected)? ii. Calculate the effect of the subsidy on Home consumer surplus, producer surplus and government revenue.

i. What is the free trade equilibrium price, output and exports? How does the Home export subsidy affect domestic price, the world price and Home exports (a numerical answer is expected)? ii. Calculate the effect of the subsidy on Home consumer surplus, producer surplus and government revenue.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter28: International Trade

Section: Chapter Questions

Problem 11P

See similar textbooks

Related questions

Q: Wilbur's is the only septic service in a remote village. The firm's total fixed cost is $125 a day…

A: The demand curve graphical representation of the relationship between price and quantity demanded.…

Q: Discuss why Ei(p∗) = 0 is compatible with a competitive equilibrium.

A: In competitive marketplaces with freely determined prices, competitive equilibrium occurs when…

Q: An Edgeworth box is shown for individuals M and N. In total, there are 100 units of good 'X and 80…

A: The Edgeworth Box is a graphical representation in microeconomics that illustrates the potential…

Q: Suppose that a consumer/investor has an initial endowment only for the current period, which is Eo…

A: The two-period consumption model is a fundamental concept in economics that explores the…

Q: Price and cost $4.00 3.20 2.40 1.60 0 851 nog posuneven sng am 150 MC 850 tempsnigirm onom 1,700 10…

A: Monopolistic competition is a form of imperfect competition. There are large number of firms. There…

Q: "Intel CEO Pat Gelsinger is putting the pressure on the U.S. government to help subsidize chip…

A: The concepts of increase in demand and supply of a good are fundamental in economics and are often…

Q: Suppose that Shen, an economist from a research facility in Washington, and Valerie, another…

A: Economists are professionals who study and dissect economic frameworks, ways of behaving, and…

Q: Recently, a poly-crises environment has become more worrisome for policymakers globally. This…

A: This can be defined as a concept that shows the continuous progress in any nation it does not happen…

Q: Which of the following best illustrates the concept of a competitive market equilibrium? Persistent…

A: The concept of a competitive market equilibrium is best illustrated by the condition of long-run…

Q: For every price leve! given in the following table, use the graph to determine the profit-maximizing…

A: Total cost refers to the expenses which are incurred by the producer on the production of goods or…

Q: A water resources project has benefits that equal $50,000 at the end of the first year and increase…

A: Benefit at the end of year 1 = $50,000Benefit at the end of year 5 = $250,000From year 1 to year 5,…

Q: Pretend that the country is in a normal economic climate. Suppose that the Federal Reserve,…

A: The Federal Reserve has announced to initiate the purchase of $2 million worth of treasury and other…

Q: What ethical issues could an online venture that sells Houdoran coffee beans address, encounter, or…

A: The objective of the question is to identify and discuss the potential ethical issues that an online…

Q: A decrease in the demand for bitcoin has the immediate effect of and the subsequent effect of…

A: A decrease in the demand for Bitcoin has the immediate effect of decreasing the purchasing power of…

Q: What would you expect to happen to these profit opportunities in the long-run? Hint: you are not the…

A: Purchasing Power Parity (PPP) is an economic theory and exchange rate regime that relates the…

Q: onsider a 2 period oil extraction setting. The inverse demand for oil is given as ?(?) = 20 − ?. The…

A: Demand is the desire of an individual ability and willingness to pay for a product. The demand is…

Q: The diagram below shows the cost and demand curves for an unregulated monopolist. In equilibrium the…

A: Costs refer to the expenses incurred by the firms., there are two types of costs fixed cost and…

Q: There are two individuals, and each is endowed with 12 units of the private good. Let U₁ = 6x +y₁,…

A: Microeconomic theory is a branch of economics that studies the behavior of individuals and firms in…

Q: Imagine a firm with a marginal abatement cost ( MAC) function equal to: MAC = 70 - 10E. The…

A: Marginal abatement costs that are being used for decreasing an additional pollution unit. The policy…

Q: Distribution of Income in Percentage of the United States Households 1985 2020 3.0 8.1 14.0 22.6…

A: The statement that best describes the data in the table is:"Between 1985 and 2020, the highest 20…

Q: Use the above diagram to explain what the possible impact of the slaughtering of chickens would be…

A: The demand curve is the graphical representation of different quantities of commodities that the…

Q: A business buys $2,000 worth of inputs from other firms in order to produce a product. The business…

A: The value-added method takes the value of final goods and services and does not include the value of…

Q: 22. Refer to above figure, which of the following statements is false?

A: An indifference curve shows the combination of two goods which derives the same level of utility to…

Q: 11. Which of the following is not true regarding Figure 11.1? Figure 11.1 ming et qua a) b) c) d)…

A: The total product curve is the graphical representation of the relationship between the quantity of…

Q: Explain briefly what you mean by the following terms: a. Variable cost b. Market Power

A: The objective of the question is to provide a brief explanation of two key economic terms: Variable…

Q: (Table: Excellence Publishing) Refer to the table. Each edited book sells for $50. What is the…

A: The marginal product of labor (MPL) is the additional output or production that results from…

Q: Consider Diagram 2. Given that M=$200, what is the Price of Textiles? Textiles 145 new Diagram 2

A: Budget line refers to the locus of points which describe the combination of goods which are…

Q: 1880 7+ln(4 + p) Step 2 of 3: What is the revenue function R? Enter your answer as a function of x.…

A: The revenue function represents the total income generated by a business or organization from…

Q: K A tariff is O A. any non- subsidy used to increase trade. B. a subsidy granted to imports. OC. a…

A: Taxation is the cycle by which a government or other taxing power powers a financial charge or duty…

Q: Suppose that the utility function is U (x, y) = x¹/³ + y¹/³, then x and y are: Hint: in this…

A: To determine whether x and y are net complements or substitutes and gross complements or…

Q: 5. Fiscal policy, the money market, and aggregate demand Suppose there is some hypothetical economy…

A: The Marginal Propensity to Consume (MPC) and Marginal Propensity to Save (MPS) are concepts in…

Q: A profit-maximizing monopolist faces the market demand schedule provided and has a constant marginal…

A: Perfect price discrimination means that the monopolist charges each consumer the maximum price they…

Q: deman curve, P = 30 - 5Q market supplly curve, P = 6+Q external cost, d =. 6 a) socially…

A: The demand curve equation is given as The market supply curve equation is The external cost is

Q: Hello, can u help me with this mcq question? the last expert got it wrong. Price $10 $8 $7 56 $4…

A: The MR is cutting the MC curve when price is $10. The ATC curve cuts the MC curve at $7The MC curve…

Q: The following is/are public health insurance program offered as safety nets to insure low income…

A: In India, public health insurance programs are designed as safety nets to insure low-income…

Q: In 2019, North Carolina consumed 114,576 thousand barrels of gasoline which is about 4.8 billion…

A: Note: Since you have posted a question with multiple sub-parts, we will provide the solution only to…

Q: -The quantity that the profit maximizing monopolist would choose to produce -The price that the…

A: Monopoly: is a type of market where there is a single seller and many buyers. The firm is the price…

Q: Fish in the deep sea are being fished to the point of extinction, yet fish in privately owned fish…

A: The objective of the question is to understand the economic reasoning behind the difference in…

Q: 9. In the simple Keynesian cross model of a closed economy without taxes, if the initial equilibrium…

A: The initial equilibrium income is given as $300 billionThe marginal propensity to consume is 0.75The…

Q: Suppose that an arena has a capacity of 20,000 seats. Over the course of a weekend, a tournament…

A: Total Number of seats in arena = 20,000Number of teams = 6Fans of each team = 2000Number of general…

Q: What is the mathematical requirement for a firm to exit a Perfectly Competitive Market in the…

A: The question is asking about the conditions under which a firm would choose to exit a perfectly…

Q: Answer all parts (a) (c) of this question. (a) Consider an agent whose preferences over any couple…

A: In economics, a utility function is a mathematical representation of an individual's preferences…

Q: Suppose that the equilibrium real federal funds rate is 6 percent and the target rate of inflation…

A: The Taylor Rule is a guideline for central banks to set interest rates based on economic conditions.…

Q: Economists define investment to include Select one: any increase in business inventories…

A: Investment, in economics refers to the allocation of money or resources to purchase or create…

Q: Sasha and Brian just bought their new home, a high-rise condo located downtown. They measured the…

A: Consumer decision making process is that when consumer makes decisions about consumerable like…

Q: Entrepreneurial activities may be harmful to economic growth in economies that are passing through…

A: ***Since the study table 5 has not been presented, so, subparts 1.2 and 1.3 cannot be solved. If the…

Q: How do I graph this please? In the graph below, use the line tool to draw the market demand curve…

A: Market demand refers to the total quantity of commodities that all consumers in a specific market…

Q: The announcement of an income tax cut for the top income earners from 45% to 40% by the previous…

A: To evaluate the effectiveness of the income tax reduction for high-income earners from 45% to 40%…

Q: If a firm has the the production function F(K, L) = min(3K, 4L) What is its contingent demand for…

A: The production function shows the relationship between output and inputs. In the case of the…

Q: 2. Table 1 below shows the number of baskets produced by a Bentle Weavers in the short run using…

A: Average Product (AP) :AP= Total Product / Units of inputMarginal Product (MP) :MP= Change in Total…

Question

Consider a large Home country which is a natural exporter of wheat. To support domestic
wheat farmers, Home introduces a wheat export subsidy of $s per unit of exports, as shown
in the figure below.
Price
80
288
70
60
50
20 30 40
S
Price
80 90 100 Quantity
X₁ X₂
Ex
Ex-s
Im
Exports
i.
What is the free trade equilibrium price, output and exports? How does the
Home export subsidy affect domestic price, the world price and Home exports (a numerical
answer is expected)?
ii.
Calculate the effect of the subsidy on Home consumer surplus, producer surplus
and government revenue.

Calculate the effect of Home subsidy on Foreign country welfare. How does this
subsidy affect global welfare?
iv.
Explain who would win and who would lose from this subsidy around the world?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Effects of subsidies

Step 2: Part i)

Step 3: Part ii)

Step 4: Part iii)

Solution

Step by step

Solved in 5 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Explain how a subsidy on agricultural goods like sugar adversely affects the income of foreign producers of imported sugar.
The country of Pepperland exports steel to the Land of Submarines. Information for the quantity demanded (Qd) and quantity supplied (Qs) in each country, in a world without trade, are given in Table 34.6 and Table 34.7. What would be the equilibrium price and quantity in each country in a world without trade? How can you tell? What would be the equilibrium price and quantity in each country if trade is allowed to occur? How can you tell? Sketch two supply and demand diagrams, one for each country, in the situation before trade. On those diagrams, show the equilibrium price and the levels of exports and imports in the world after trade. If the Land of Submarines imposes an anti- dumping import quota of 30, explain in general terms whether it will benefit or injure consumers and producers in each country. Does your general answer change if the Land of Submarines imposes an import quota of 70?
Assume two countries, Thailand (T) and Japan (J), have one good: cameras. The demand (d) and supply (s) for cameras In Thailand and Japan is described by the following functions: QsT=-5+14P QsJ=-10+14P QdT=60-P QdJ=80-P P is the price measured in a common currency used in both countries, such as the Thai Baht. Compute the equilibrium price (P) and quantities in each country without trade. Now assume that free trade occurs. The free-trade price goes to 56.36 Baht. Who exports and Imports cameras and in what quantities?
How would direct subsidies to key industries be preferable to tariffs or quotas?
Trade has income distribution effects. For example, suppose that because of a government-negotiated reduction in trade barriers, trade between Germany and the Czech Republic increases. Germany sells house paint to the Czech Republic. The Czech Republic sells alarm clocks to Germany. Would you expect this pattern of trade to increase or decrease jobs and wages in the paint industry in Germany? The alarm clock industry in Germany? The paint industry in Czech Republic? The alarm clock industry in Czech Republic? What has to happen for there to be no increase in total unemployment in both countries?