Trade Problem Set 90 2-5

1. If the liberalization of agricultural markets proceeds in the future many countries may eliminate export subsidies to farm products. Use a partial equilibrium (supply and demand) diagram to depict the price and welfare effects of an export subsidy elimination for corn. For simplicity, assume that the export country is small in international markets and that there are no market imperfections or distortions.

Draw Graph Here:

Identify where on the graph the following appear.

ORIGINAL DOMESTIC PRICE:

FINAL DOMESTIC PRICE:

INITIAL PER UNIT SUBSIDY:

CHANGE IN C.S.:

CHANGE IN P.S.:

CHANGE IN GOVT. REVENUE:

CHANGE IN NATIONAL WELFARE:

EFFICIENCY BENEFITS

International Trade Theory and Policy - Chapter 90: Last Updated on 1/06/08