Question
When China opens up to trade, the domestic price of grain will to An export tax of 1 per bushel will then the domestic price of grain to Compare each of the market conditions before and after the export tax of 1 per bushel in the following table. (Note: Assume China is open to trade in both scenarios.) Before Export Tax After Export Tax (Millions of dollars) (Millions of dollars) Domestic Consumer Surplus Domestic Producer Surplus Government Revenue Total Chinese Welfare
Answer
3.9
(254 Votes)
Lottie
Master · Tutor for 5 years
Answer
#ExplanationThe question is about the impact of an export tax on the domestic price of grain in China, assuming that China is open to trade in both scenarios. The export tax will affect the domestic price of grain, consumer surplus, producer surplus, government revenue, and total welfare in China. The domestic price of grain will likely increase due to the export tax. This is because the tax increases the cost of exporting grain, which reduces the supply of grain in the international market. As a result, the domestic price of grain increases.The domestic consumer surplus will likely decrease due to the increase in the domestic price of grain. Consumer surplus is the difference between what consumers are willing to pay and what they actually pay. When the price increases, consumers are required to pay more, reducing their surplus.The domestic producer surplus will likely increase due to the increase in the domestic price of grain. Producer surplus is the difference between what producers are willing to accept and what they actually receive. When the price increases, producers receive more, increasing their surplus.The government revenue will increase due to the export tax. The government collects the tax from the exporters of grain, increasing its revenue.The total Chinese welfare is the sum of the consumer surplus, producer surplus, and government revenue. The impact of the export tax on total welfare is uncertain without specific numbers. It depends on the magnitudes of the changes in consumer surplus, producer surplus, and government revenue. If the increase in producer surplus and government revenue is greater than the decrease in consumer surplus, total welfare will increase. Otherwise, total welfare will decrease.#AnswerWithout specific numbers, it's impossible to provide a precise answer. However, the general trends are as follows:- Domestic price of grain: Increase- Domestic consumer surplus: Decrease- Domestic producer surplus: Increase- Government revenue: Increase- Total Chinese welfare: Uncertain (depends on the magnitudes of the changes in consumer surplus, producer surplus, and government revenue)