9. Effects of a tariff on international trade The following graph shows the dome
ID: 1123075 • Letter: 9
Question
9. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for oranges in New Zealand. The world price (Pw) of oranges is $810 per ton and is represented by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the world price of oranges and that there are no transportation or transaction costs associated with international trade in oranges. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Graph Input Tool Market for Oranges in New Zealand 1215 1170 1125 1080 1035 990 945 900 855 810 765 Price (Dollars per ton) Domestic Demand (Thousands of tons of oranges 1,050 Domestic Supply Thousands of tons of 110 oranges) 0 30 60 90 120 150 180 210 240 270 300 QUANTITY (Thousands of tons of oranges) If New Zealand is open to international trade in oranges without any restrictions, it will import tons of oranges. Suppose the New Zealand government wants to reduce imports to exactly 60,000 tons of oranges to help domestic producers. A tariff of per ton will achieve this. A tariff set at this level would raise$ in revenue for the New Zealand government.Explanation / Answer
1>If New....., it will import (270-30)=240 thousand tons of oranges.
2> Suppose ....(930-810)=$120 per ton...
Reason
This is the price at which the black dotted lines connect the supply and demand=930
3> A tariff ... $120x60,000=$7,200,000 in revenue
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.