To encourage the domestic production of soybean oil, the Indian government impos

Question

To encourage the domestic production of soybean oil, the Indian government imposed a 20% tariff on the import of soybean oil. The world price, when the tariff was imposed, was (in terms of the Indian currency, rupees) Rs.1,000 per ton of oil. The figure to the right shows the domestic supply and the level of imports before and after the imposition of the tariff Supply Suppose as result of the higher price of soybean oil, new domestic firms enter the market, causing an increase in the demand for Soybeans. Which of the following is the most likely implication of this? A. The tariff revenue earned by the Indian government will decline B. The foreign producers will benefit as they can increase exports to India ° C. The demand for soybean oil will increase 0 D. The deadweight loss will increase 1.200 9 E. The Indian consumers will lose more surplus nand 11 18 2 Quantity of soybean oil (millions of tons)

Explanation / Answer

The answer is B-) The foreign producers will benefit as they can increase exports to india.

Because although after the tariff, the world price of soyabean oil is still high and domestic supply is less than quantity demand. Thus there will a shortage of soyabean oil in market. Thus there is why foreign producer will get benefits as they increase exports to india.

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