3. Welfare effects of a tariff in a small country
atalog
tiers
Suppose Bangladesh is open to free trade in the world market for oranges. Because of Bangladesh's small size, the demand for and supply of oranges
in Bangladesh do not affect the world price. The following graph shows the domestic oranges market in Bangladesh. The world price of oranges is
Pw - $800 per ton
Bons
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On the following graph, use the green triangle (trangle symbols) to shade the area representing consumer surplus (CS) when the economy is at the
free-trade colibrium. Then use the purple triangle (diamond symbols) to shade the area representing producer surplus (PS),
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