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Question 4: China is a large exporter of rare earths. The free trade price of a specific type of rareearth is $20 per unit. Let
Question 4: China is a large exporter of rare earths. The free trade price of a specific type of rareearth is $20 per unit. Let us say that China imposes an export tax of $4. This increases the international price of rare-earths to $23. The following are the domestic production and exports of rare-earth before and after the tax in China: Quantity produced in free trade: 10 million; Quantity exported in free trade: 4 million Quantity produced with tax: 8 million; Quantity exported with tax: 1 million a. Draw graphs for China and its trading partner to examine the welfare effects: (5 points) b. Calculate the following: (i) Change in Consumer Surplus. (3 points) (ii) Change in Producer Surplus. ( 3 points) (iii) Deadweight loss. ( 3 points) (iv) Gains transferred from China's trading partners to China. ( 3 points) (v) Net welfare gain/loss in China. (3 points) (vi) Net welfare gain/loss in China's trading partners. ( 3 points) Question 4: China is a large exporter of rare earths. The free trade price of a specific type of rareearth is $20 per unit. Let us say that China imposes an export tax of $4. This increases the international price of rare-earths to $23. The following are the domestic production and exports of rare-earth before and after the tax in China: Quantity produced in free trade: 10 million; Quantity exported in free trade: 4 million Quantity produced with tax: 8 million; Quantity exported with tax: 1 million a. Draw graphs for China and its trading partner to examine the welfare effects: (5 points) b. Calculate the following: (i) Change in Consumer Surplus. (3 points) (ii) Change in Producer Surplus. ( 3 points) (iii) Deadweight loss. ( 3 points) (iv) Gains transferred from China's trading partners to China. ( 3 points) (v) Net welfare gain/loss in China. (3 points) (vi) Net welfare gain/loss in China's trading partners. ( 3 points)
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