ECN450 week 4
Chapter 6 Problems
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Complete "Study Question" 13 at the end of
chapter 6 in the textbook.
You are not required to submit this assignment to Turnitin.
13. Assume that the nation of Spain is “small” and
unable to influence the Brazilian (world) price
of steel. Spain’s supply and demand schedules
are illustrated in Table 6.11. Assume that Brazil’s
price is $400 per ton of steel. Using graph
paper, plot the demand and supply schedules
of Spain and Brazil on the same graph.
a. With free trade, how many tons of steel will
be produced, purchased, and imported by
Spain? Calculate the dollar value of Spanish
producer and consumer surpluses.
b. Suppose the Brazilian government grants its
steel firms a production subsidy of $200 per
ton. Plot Brazil’s subsidy-adjusted supply
schedule on your graph.
(1) What is the new market price of steel? At
this price, how much steel will Spain produce,
purchase, and import?
(2) The subsidy helps/hurts Spanish firms
because
their producer surplus rises/falls
by $_____; Spanish steel users realize a rise/
fall in the consumer surplus of $_______.
The Spanish economy as a whole benefits/
suffers from the subsidy by an amount
totaling
$_______.
You are not required to submit this assignment to Turnitin.
13. Assume that the nation of Spain is “small” and
unable to influence the Brazilian (world) price
of steel. Spain’s supply and demand schedules
are illustrated in Table 6.11. Assume that Brazil’s
price is $400 per ton of steel. Using graph
paper, plot the demand and supply schedules
of Spain and Brazil on the same graph.
a. With free trade, how many tons of steel will
be produced, purchased, and imported by
Spain? Calculate the dollar value of Spanish
producer and consumer surpluses.
b. Suppose the Brazilian government grants its
steel firms a production subsidy of $200 per
ton. Plot Brazil’s subsidy-adjusted supply
schedule on your graph.
(1) What is the new market price of steel? At
this price, how much steel will Spain produce,
purchase, and import?
(2) The subsidy helps/hurts Spanish firms
because
their producer surplus rises/falls
by $_____; Spanish steel users realize a rise/
fall in the consumer surplus of $_______.
The Spanish economy as a whole benefits/
suffers from the subsidy by an amount
totaling
$_______.
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