Question

 

Answer 1

Refer the attached picture below (sorry I have done it manually since I don't have access to the interactive tool)

Guatemala Domestic Market for Poultry Price ($) 1.1 S 1.0 0.9 0.8 0.7 0.6 0.5 P-tariff 0.4 0.3- Pw 0.2 D 0.1 0.0 60 80 100 120 140 160 180 200 220 Kilograms (thousands) 40 20

A. Under the tariff the quantity of poultry consumed is 140 thousand kgs and the quantity of poultry produced in Guatmala under the tariff is 60 thousand kgs.

The quantity of imports = 80 thousand kilograms.

Note : 140 - 60 = 80 thousand kgs

B. When there is no tariff then the price = $ 0.30

But due to increase in price of chicken feed the price has increased to $ 0.40 per kg

The quantity of poultry consumed is 140 thousand kgs and the quantity of poultry produced in Guatmala under the tariff is 60 thousand kgs.

The quantity of imports = 80 thousand kilograms.

C. Refer the picture the two triangles are DWL

Guatemala Domestic Market for Poultry Price ($) 1.1 S 1.0 0.9 0.8 0.7 0.6 0.5 P-tariff 0.4 0.3- Pw 0.2 D 0.1 0.0 60 80 100 120 140 160 180 200 220 20 Kilograms (thousands) PpW 40

Dead weight loss due to tariff

= 0.5 ×(60-40)×0.1 + 0.5 × (160-140)×0.1

= 2 × 0.5 × 20 ×0.1

= $ 2 (in thousands $)

The deadweight loss under the tariff = $ 2 thousand.

The DWL resulting from the higher price of chicken feed is $ 0 thousand.

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