6. Restricting Imp Aa Aa The following calculator shows the domestic supply of a

Question

6. Restricting Imp Aa Aa The following calculator shows the domestic supply of and demand for com in Bangladesh. Bangladesh is open to International trade of corn without any restrictions. The world price of corn is $125 per ton and is represented by the hortzontal brown line. Throughout the question assume that the amount demanded by any one country does not affect the world price of corn and that there are no transportation or tran possible before any exporting or importing takes place. costs associated with International trade in corn. Also assume that domestic suppliers will satisty domestic demand as much as Use the calculator to help you complete the following exercises. You will not be graded on any changes you make to the calculator. Tool tip: Use your mouse to drag the green line on the graph. The values in the boxes on the right side of the calculator will change accordingly You can also directly change the value in the box with the white background by clicking in the box and typing. When you click the button labeled Calculate," the graph and any related values will change accordingly. PRICE tDollars per tonl 575 475. tent 800 175 125 200 400 600 800 1000 00 e rch

Explanation / Answer

(a) When world price = $125,

Domestic consumption = 900,000

Domestic production = 100,000

Import = 900,000 - 100,000 = 800,000

(b) When import = 200,000:

Domestic consumption - Domestic production = 200,000

This condition holds true when Domestic consumption = 600,000 and Domestic production = 400,000

This level of import is achieved at a price of $275.

Equivalent tariff = $275 - $125 = $150

(c) Tariff revenue = Unit tariff x Import = $150 x 200,000 = $30,000,000 ($30 million)

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