1. Your textbook discusses the benefits of cheaper imports on pages 171-173. Draw a graph that shows the effects on consumer and producer surplus (gain or loss) that result from a country importing a good.
2. Recently, China placed tariffs on the importation of US soybeans. Assume that the domestic market for soybeans in China is described by the following equations:
Demand: P = 115 – 1/15Q Supply: P = 55 + 1/15Q
Where P is Yuan per bushel of soybeans and Q is 10 million bushels per year.
The world price for soybeans is ¥65/bushel. Graph the soybean market in China showing equilibrium both with no barriers to trade and with a ¥15/bushel tariff. Be sure to fully and clearly label the graph including the Domestic Demand curve, Domestic Supply curve, the World Price, and the Price with tariffs.
3. How many bushels of soybeans can the US export to China if there are no tariffs? How many bushels with the imposed tariff?
4. Who are the greatest benefactors of China’s tariff on US soybeans?
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