Consider a small country that exports steel. Suppose the following graph depicts
ID: 1111186 • Letter: C
Question
Consider a small country that exports steel. Suppose the following graph depicts the domestic demand and supply for steel in this country. One of the two price lines represents the world price of steel Use the following graph to help you answer the questions below. You will not be graded on any changes made to this graph 100 90 Triange 80 70 80 50 40 20 10 0 100 200 300 400 500 600 700 800 900 1000 Quantity of Steel Tons) Because this country exports steel, the world price is represented by Suppose that a "p e" government decides to subsidize the export of steel by paying $10 for each ton sold abroad With this export subsidy, the price paid by domestic consumers is ton. The quantity of steel consumed by domestic consumers per ton, and the price received by domestic producers is , the quantity of steel p d by domestic producers , and the quantity of steel exportedExplanation / Answer
As the country is an exporter of steel so the world price line must be above its domestic price line so the world price is 60. As its an export subsidy it effects those whom they are exporting hence price paid by domestic consumer is 50 and the domestic producer gains $ 10 on selling abroad… hence by selling to domestic consumer they receive only $ 50. Amount of steel consumed by domestic consumer is 300 and quantity of steel produced is 500 units and hence exported = (500-300)= 200 units
False, an export subsidy is given to boost the export and hence it will increase export so there is no question for import.