China is a major producer of grains, such as wheat, corn, and rice. In 2008 the...

China is a major producer of grains, such as wheat, corn, and rice. In 2008 the Chinese government, concerned that grain exports were driving up food prices for domestic consumers, imposed a tax on grain exports. a- Draw the graph that describes the market for grain in China. Use this graph as the starting point to answer the following questions. b- How does an export tax affect domestic grain prices in China? c- How does it affect the welfare of Chinese’ consumers, the welfare of Chinese’ producers, and government revenue? d- What happens to total welfare in China, as measured by the sum of consumer surplus, producer surplus, and tax revenue?

Expert Solution

Rahul Sunny answered 9 months ago

China is a major producer of grains such as wheat, corn, and rice. Assume that it is also an exporting country in the market for grain. Suppose the following graph depicts the market for grain in China.

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