5.

Suppose Freedonia opens itself up to international trade. Use the grey polygon to determine changes in consumer and producer surplus that result from free trade. Select and drag the shaded region from the palette to the graph. To resize the shaded region, select one of the grey stars and move it to the desired position. You will not be scored on where you place this polygon on the graph. At the world price of $8 per kilogram, Freedonia will million kilograms of strawberries per week. After trade, consumer surplus in Freedonie's strawberry market will by million per week and producer surplus will million per week. Free trade total surplus in Freedonie's strawberry market by $ million per week.Suppose the following graph shows the domestic demand (D) and domestic supply (S) for cheese in Algeria, which is a producer as well as an importer of cheese. The free trade world price of cheese (P.) is $2,500 per tonne. 7000 Price with Tariff 6800 8000 Tariff Revenue S PRICE/ COST (Dollars per tonne ) 4000 3800 Change in PS 3000 2800 2000 DWL 1800 1000 2 3 9 10 11 12 QUANTITY (Millions of tonnes) With free trade, the price of cheese in Algeria would be $ per tonne. Algeria would produce million tonnes of cheese and import million tonnes.Suppose Algeria's government imposes a 60% tariff on cheese imports. Assume the tariff does not influence the world price of cheese. On the preceding graph, use the black line (plus symbol) to show the world supply of cheese with the tariff. The tariff Algeria's production of cheese by million tonnes, its domestic consumption by million tonnes, and its imports by million tonnes. On the preceding graph, use the green quadrilateral (triangle symbols) to shade the area that represents tariff revenue. Then use the purple point (diamond symbol) to shade the area that represents the change in the producer surplus resulting from the tariff. Finally, use the black points to shade the area, or areas if there are more than one on the graph, that together represent the deadweight loss resulting from the tariff. Note: Select and drag a fill aree point from the palette to the graph. To fill in regions on the graph, merely drop the fill area point on the desired region. Fill in the blank cells in the following table to summarize the effects of the tariff on Algeria's welfare. (Hint: The ares of each shaded region on the graph can be found by clicking on the polygon.) Amount of Change Change In... Gain or Loss ( Millions of dollars) Tariff revenue Producer surplus Consumer surplus Change in total welfare7 . The arguments for restricting trade Suppose there is a policy debate over whether Canada should impose trade restrictions on imported tires: Domestic producers of tires send a lobbyist to the Canadian government to request that the government impose trade restrictions on imports of tires. The lobbyist claims that producers in other countries receive subsidies to export tires at prices below what it costs to produce tires, perhaps in an attempt to gain greater world market share, and that domestic suppliers can't compete in the international marketplace. Which of the following justifications is the lobbyist using to argue for the trade restriction on tires? O National security argument O Saving-domestic-jobs argument O Unfair competition argument O Anti-dumping argument O Using-protection-as-a-bargaining-chip argument O Infant industry argumentAssignment 2 Consider the Kenyan market for lemons. The following graph shows the domestic demand and domestic supply curves for lemons in Kenya. Suppose Kenya's government currently does not allow international trade in lemons. Use the black point (plus symbol) to indicate the equilibrium price of a tonne of lemons and the equilibrium quantity of lemons in Kenya in the absence of international trade. Then, use the green point (triangle symbol) to shade the area representing consumer surplus in equilibrium. Finally, use the purple point (diamond symbol) to shade the area representing producer surplus in equilibrium. Note: Select and drag a fill area point from the palette to the graph. To fill in regions on the graph, merely drop the fill area point on the desired region. 1400 Domestic Demand Domestic Supply 1300 No Trade Equilibrium 1200 1100 A 1000 Consumer Surplus PRICE (Dollars per tonne) 900 O BOO Producer Surplus 700 20 40 GO 80 100 120 140 160 180 200 QUANTITY (Thousands of tonnes of lemons)When Kenya allows free trade in lemons, the price of a tonne of lemons in Kenya will be $800. At this price, the quantity of lemons demanded by Kenyan consumers will be tonnes , and the quantity of lemons supplied by domestic producers will be tonnes. Therefore, Kenya will import tonnes of lemons. Using the information from the previous tasks, complete the following table to analyze the welfare effect of allowing free trade. (Hint: Be sure to enter consumer and producer surplus in millions of dollars. Take note of the units on the graph.) Without Free Trade With Free Trade ( Millions of dollars) (Millions of dollars) Consumer Surplus Producer Surplus When Kenya allows free trade, the country's consumer surplus by million, and producer surplus by S million. So, the net effect of international trade on Kenya's total surplus is a of S million.5 . The effects of exports on surplus The following graph shows the weekly domestic market for strawberries in Freedonie. In the absence of trade, the domestic price of strawberries is $5 per kilogram and the equilibrium quantity is 7 million kilograms per week. The world price of strawberries is $8 per kilogram. TO Domestic Demand Domestic Supply Scratch Area PRICE (Dollars per kilogram) 2 4 5 9 QUANTITY (Millions of kilograms)