Consider a small country that exports steel. Suppose the following graph depicts the domestic demand and supply for steel in this country. One of the two price lines represents the world price of steel.

Use the following graph to help you answer the questions below. You will not be graded on any changes made to this graph.

Because this country exports steel, the world price is represented by A. P2 or B. P1.

Suppose that a "pro-trade" government decides to subsidize the export of steel by paying $10 for each ton sold abroad.

With this export subsidy, the price paid by domestic consumers is $ANSWER? per ton, and the price received by domestic producers is $ANSWER? per ton.

he quantity of steel consumed by domestic consumers A. increase, B. Decrease, C. remains unchanged, the quantity of steel produced by domestic producers A. increase, B. Decrease, C. remains unchanged, and the quantity of steel exported A. increase, B. Decrease, C. remains unchanged.

True or False: With the export subsidy, domestic producers will not sell any steel to domestic consumers.

Under the export subsidy, consumer surplus is ANSWER? and producer surplus is ANSWER?. Government revenue A. decreases or B. Increasesby ANSWER?. As a result, total surplusA. increase, B. Decrease, C. remains unchanged.

Demand Supply 100 90 Triangle 80 P 2 70 60 Polygon 50 Price of Steel (Dollars per ton) 40 30 20 10 O 0 100 200 300 400 500 600 700 800 900 1000 Quantity of Steel (Tons)