Reference no: EM133167070

The graph below shows the market for apricots in the United States, a nation that is open to international trade but is assumed to be a price taker unable to affect the world price of apricots. 

a. In the graph below, identify the areas that represent consumer surplus (CS) and producer surplus (PS) with international trade. 

Instructions: Use the tools provided 'CS' and 'PS' to illustrate these areas on the graph.

Now suppose that domestic apricot growers in the United States convince the government to impose a tariff (tax) on imported apricots to raise the price in the United States to $700 per ton. 

b. Using the graph below, indicate the new price with the tariff imposed and identify the areas that represent the new consumer surplus (CS), new producer surplus (PS), and the tariff revenue with this new tariff in place.

Instructions: Use the tool provided 'P_{w + tariff}' to draw the new price after the tariff has been imposed. Then use the tools provided 'Q_{s + tariff}' and 'Q_{d+ tariff}' to indicate the domestic quantity supplied and domestic quantity demanded with this tariff in effect. Finally, use the tools provided 'New CS,' 'New PS,' and 'Tariff Revenue' to illustrate these areas on the graph. 

Instructions: Make sure you include all zeros in your answer.

c. With this tariff in place, how much tariff revenue is generated by the government through the tariff on apricots?

d. Given your answers above, who benefits from this tariff?

Multiple choice

• Domestic apricot growers and the government
• Domestic consumers and the government
• Both domestic consumers and domestic apricot growers
• Both domestic and foreign apricot growers

e. Using the graph below, identify the area that represents the surplus lost to this economy, which is also known as deadweight loss or DWL, as a result of this restriction of international trade.

Instructions: Use the tool provided 'P_{w + tariff}' to draw the new price after the tariff has been imposed. Then use the tools provided 'Q_{s+ tariff}' and 'Q_{d+ tariff}' to indicate the domestic quantity supplied and domestic quantity demanded with this tariff in effect. Finally, use the tools provided 'DWL left' and 'DWL right' to illustrate the two areas on the graph that represent deadweight loss.