China is a major producer of grains, such as wheat, corn and rice. Some years ago, the Chinese Government, concerned that grain exports were driving up food prices for domestic consumers, imposed a tax on grain exports.

a Draw the graph that describes the market for grain in an exporting country. Use this graph as the starting point to answer the following questions.

b How does an export tax affect domestic grain prices?

c How does it affect the welfare of domestic consumers, the welfare of domestic producers and government revenue?

d What happens to total welfare in China, as measured by the sum of consumer surplus, producer surplus and tax revenue?