The following graph shows the domestic demand for and supply of maize in Bolivia. The world price (Pw) of maize is $240 per ton and is displayed as a horizontal black line. Throughout the question, assume that all countries under consideration are small, that is, the amount demanded by any one country does not affect the world price of maize and that there are no transportation or transaction costs associated with international trade in maize. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.
The following graph shows the domestic demand for and supply of maize in Bolivia. The world price (Pw) of maize is $240 per ton and is displayed as a horizontal black line. Throughout the question, assume that all countries under consideration are small, that is, the amount demanded by any one country does not affect the world price of maize and that there are no transportation or transaction costs associated with international trade in maize. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter34: Globalization And Protectionism
Section: Chapter Questions
Problem 55P: Assume two countries, Thailand (T) and Japan (J), have one good: cameras. The demand (d) and supply...
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Transcribed Image Text:4. Effects of a tariff on international trade
The following graph shows the domestic demand for and supply of maize in Bolivia. The world price (Pw) of maize is $240 per ton and is displayed as
a horizontal black line. Throughout the question, assume that all countries under consideration are small, that is, the amount demanded by any one
country does not affect the world price of maize and that there are no transportation or transaction costs associated with international trade in maize.
Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.
PRICE (Dollars per ton)
440
415
390
365
340
315
290
265
240
215
190
Domestic Demand
0 10 20
Domestic Supply
30 40 50 60 70
QUANTITY (Tons of maize)
80 90 100
Transcribed Image Text:PRICE (Dollars per ton)
440
415
390
365
340
315
290
265
240
215
190
0
Domestic Demand
10 20
Domestic Supply
30 40 50 60
QUANTITY (Tons of maize).
80 90 100
If Bolivia is open to international trade in maize without any restrictions, it will import
A tariff set at this level would raise $
Suppose the Bolivian government wants to reduce imports to exactly 40 tons of maize to help domestic producers. A tariff of S
achieve this.
tons of maize.
in revenue for the Bolivian government.
per ton will
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