(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:

Business Selling

The process of selling products or services directly to other businesses rather than individual consumers.

Sales Call

A communication method, often a phone call or face-to-face meeting, initiated by a sales representative towards a potential buyer to sell a product or service.

Small Talks

Casual or informal conversation about non-essential or trivial topics, often used to initiate social interaction.

Competitors' Activities

Actions and strategies implemented by competing businesses in the market.