In: Economics
4. Effects of a tariff on international trade
The following graph shows the domestic supply of and demand for soybeans in Guatemala. The world price (Pw) of soybeans is $525 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 soybeans and that there are no transportation or transaction costs associated with international trade in soybeans. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.
If Guatemala is open to international trade in soybeans without any restrictions, it will import _______ tons of soybeans.
Suppose the Guatemalan government wants to reduce imports to exactly 20 tons of soybeans to help domestic producers. A tariff of _______ will achieve this.
A tariff set at this level would raise $_______ in revenue for the Guatemalan government.