4. Effects of a tariff on international trade graph shows the domestic supply of

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4. Effects of a tariff on international trade graph shows the domestic supply of and demand for wheat in New Zealand. The world price (Pu) of wheat is $260 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. 500 Domestic Demand Domestc Suppl Type here to search

Explanation / Answer

Ans

Will import 240-60=180

Tariff of 320-240=60

(60)(180-120)=3600 revenue

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