Guatemala represents a small part of the world poultry market Assume that the wo
ID: 1216614 • Letter: G
Question
Guatemala represents a small part of the world poultry market Assume that the world price of poultry is $0.30 per kilogram. Suppose a $0.10 per kilogram tariff is imposed on poultry imports. Based on the figure below, answer the following. Under the tariff, the quantity of poultry consumed is) thousand kilograms and the quantity of poultry produced in Guatemala under the tariff is)thousand kilograms. Now suppose the tariff is eliminated and instead the world price of chicken feed increases significantly. This causes the world price of poultry to rise from $0.30 per kilogram to $0.40 per kilogram.Explanation / Answer
a) With tariff, P = 0.40 where demand = 140 but supply = 60, Imports = 140 - 60 => 80
b) Due to price rise P = 0.40 where demand = 140 but supply = 60, Imports = 140 - 60 => 80
c) In case of tariff, dead weight losss = area of 2 triangles whose Height = 0.10 and base = 20 =>
2 ( 1/2 x 0.10 x 20) = 2 {Rest amount is tariff revenue of government}
d) In case of price rise, dead weight losss = area of 2 triangles whose Height = 0.10 and base = 20 + Area of rectangle whose L = 0.10 and b = 40 => 2 ( 1/2 x 0.10 x 20) + 0.10 x40 = 2 + 4 = 6
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