Welfare effects of a tariff in a small country Suppose Guatemala is open to free trade in the world market for soybeans. Because of Guatemala's small size, the demand for and supply of soybeans in Guatemala do not affect the world price. The following graph shows the domestic soybeans market in Guatemala. The world price of soybeans is P $400 per ton. On the following graph, use the green triangle (triangle symbols) to shade the area representing consumer surplus (cs) when the economy is at the free-trade equilibrium. Then, use the purple triangle (diamond symbols) to shade the area representing producer surplus (Ps). 1200 Domestic Demand Domestic Supply 1000 800 700 a 500 400 300 20 40 60 80 100 120 140 160 180 200 QUANTITY Tons of soybeans)

pur-new-sol

Related Questions