GLOBAL ECONOMICS (International Trade) Dr. Andrew L. H. Parkes “A Macroeconomic Understanding for use in Business” Day 17 卜安吉

International Trade, Day 172 Quiz 18 Agricultural Price Support D S PfPf

International Trade, Day 173 Quiz 18 Agricultural Price Support P f is the Price floor ($2.50). P f is the Price floor ($2.50). The world price is $1.50. The world price is $1.50. Producers grow 4,000 bushels. Producers grow 4,000 bushels. Consumers buy 1,500 bushels. Consumers buy 1,500 bushels. So the government buys 2,500 bu So the government buys 2,500 bu

International Trade, Day 174 Quiz 18 Agricultural Price Support 1. a) The effective price is $2 if P f is $1.50 b) The effective price is $2.50 if P f is $2.50 b) The effective price is $2.50 if P f is $ a) Government buys the surplus to keep the price at the support level. b) Producers grow 4,000 bushels. c) So the government spends $2,500 (sells the surplus as exports at the world price)

International Trade, Day 175 Quiz 18 Agricultural Price Support As a small country (in the world wheat market), Europe selling wheat does not affect the world price. As a small country (in the world wheat market), Europe selling wheat does not affect the world price. Other much larger producers include Kazakstan, Canada, Australia and the U.S.A. Other much larger producers include Kazakstan, Canada, Australia and the U.S.A. So the subsidy = ($ $1.50) x (4k – 1.5k) So the subsidy = ($ $1.50) x (4k – 1.5k) = $2,500 = $2,500