The graph below shows the domestic demand and domestic supply for soybeans. Assu

Question

The graph below shows the domestic demand and domestic supply for soybeans. Assume this country is open to international trade, that soybeans are a perfectly competitive good, and that the world price of soybeans is $30. Price (S) Suppose a tariff of $10 is imposed. What price will result in this country? 100 90 Domestic supply 80 Number 70 60 50 40 After the tariff is imposed, how many units of soybeans will be imported? World price 20 10 0 Number Domestic demand Units 0 10 20 30 4050 60 70 80 90 100 Quantity

Explanation / Answer

After tariff of 10$ is imposed,new world price=30+10=40 $

At price =40$, domestic demand=60 but domestic supply=40

so import= domestic demand-domestic supply

               =60-40

               = 20 units

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