4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for wheat in Kenya. The world price ( Pw) of wheat is $250 per bushel and is represented by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the world price of wheat and that there are no transportation or transaction costs associated with international trade in wheat. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. PRICE (Dollars per bushel) 475 450 425 400 375 350 325 300 275 250 225 0 Domestic Demand i Domestic Supply 10 20 30 40 50 60 70 QUANTITY (Bushels of wheat) 80 2 ■ A tariff set at this level would raise $ 90 P. PW 100 (?) If Kenya is open to international trade in wheat without any restrictions, it will import bushels of wheat. Suppose the Kenyan government wants to reduce imports to exactly 20 bushels of wheat to help domestic producers. A tariff of $ per bushel will achieve this. in revenue for the Kenyan government.

4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for wheat in Kenya. The world price ( Pw) of wheat is $250 per bushel and is represented by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the world price of wheat and that there are no transportation or transaction costs associated with international trade in wheat. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. PRICE (Dollars per bushel) 475 450 425 400 375 350 325 300 275 250 225 0 Domestic Demand i Domestic Supply 10 20 30 40 50 60 70 QUANTITY (Bushels of wheat) 80 2 ■ A tariff set at this level would raise $ 90 P. PW 100 (?) If Kenya is open to international trade in wheat without any restrictions, it will import bushels of wheat. Suppose the Kenyan government wants to reduce imports to exactly 20 bushels of wheat to help domestic producers. A tariff of $ per bushel will achieve this. in revenue for the Kenyan government.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 2PA

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