(A) Using a Demand/supply Diagram, Illustrate and Explain the Effects

question 14

Essay

(a) Using a demand/supply diagram, illustrate and explain the effects of the imposition of an export tax on a good Y by a home country's government on (i) the home country's consumers of Y, (ii) the home country's producers of Y, and (iii) the home government's tax revenues. (Assume that the country is a "small" country.) Then indicate the "net welfare effect" of the tax on the country. Why might a country want to impose an export tax? Briefly explain.
(b) Suppose now that the country imposing the export tax in part (a) of this question is a "large" country rather than a "small" country. Is it an advantage or a disadvantage for a country to be "large" rather than "small" when it imposes an export tax? Briefly explain. (No diagrams are necessary in this part of the question.)

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Definitions:

Regulatory Action

Steps or interventions taken by a government agency to enforce rules, regulations, or laws, usually to protect public interest.

Hidden Fees

Charges or costs that are not disclosed upfront or are difficult to find in the terms of an agreement or contract.

Federal Trade Commission

An independent agency of the United States government, established in 1914 to prevent unfair methods of competition and unfair or deceptive acts or practices in commerce.

U.S. Economy

The economic system of the United States, characterized by private enterprise, diverse industries, and global trade relations.