xAplia: Student Question × \'(G if venezuela is open to interna × courses.aplia.

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xAplia: Student Question × '(G if venezuela is open to interna × courses.aplia.com/af/servlet/quiz?quiz.action-takeQuiz&quiz; probGuid-Q4PLCOA80101000000414c7260070 Attempts: Average: /3 4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for soybeans in Venezuela. The world price (Pw) represented by the horizontal black line. Throughout the question, assume that the amount demanded by any on price of soybeans and that there are no transportation or transaction costs associated with international trade in s domestic suppliers will satisty domestic demand as much as possible before any exporting or importing takes plac 930 Domestic Demand Domestic Supply 830 780 730 880 630 530 0 30 60 120 150 180 210 240 270 300 QUANTITY (Tons of soybeans) 8 MacBook Pro G Search or tyne URI

Explanation / Answer

If Venezuela enter the international trade in soybeans then it has to conduct trade at world price.

The world price is $530 per ton.

At $530 per ton, domestic quantity supplied is 60 tons of soybeans while domestic quantity demanded is 240 tons of soybeans.

Imports = Quantity demanded - Quantity supplied = 240 tons - 60 tons = 180 tons of soybeans

So,

If Venezuela is open to international trade in soybeans without any restrictions, it will import 180 tons of soybeans.

Exactly 60 tons of soybeans wouold be imported at price of $630 per ton of soybeans.

So,

A tariff of $100 per ton will achieve this.

Revenue raised = $100 * 60 tons = $6,000

So,

A tariff set at this level would raise $6,000 in revenue for the Venezuelan government.

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