Question

1. Assuming the soy bean market in North Dakota is perfectly competitive and at the equilibrium, a large proportion is sold to buyers in China, use the supply and demand model to answer the following questions

   1. The Chinese government announced an increase in the tariff on the soy beans

      produced in the US. How does this policy affect the equilibrium of the soy bean

      market in North Dakota? How does it affect the welfare of farmers?

   2. If the US government announce a subsidy on the production of soy beans, how will it

      further change the equilibrium?

Answer 1