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ID: 1163610 • Letter: C
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C ? , | a search the web E Apps D Amazon.com-Onlin D Priceline.com D TripAdvisor ?11mported From IE x Aplio: Student Question X cSecure https:/courses.aplia.com/af/servlet/quiz?ctx srobichaux-00028quiz action-takeQuizkquiz probGuid-Q4PLCOA8010100000041bC Apps A Amazon.com-Onlir Imported From IE 4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for maize in Panama. The world price (Pw) of maize is $240 per ton a by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the worl and that there are no transportation or transaction costs associated with international trade in maize. Also, assume that domestic supp domestic demand as much as possible before any exporting or importing takes place 480 Domestic Demand Domestic Supply 450 ??? 300 300 270 240 + 0Explanation / Answer
Effect of a tariff on world price
In the given figure the world price for maize is equal to $240 per ton which shown by the dark line.Now it is given that there is no transportation or transaction cost on international trade of maize. Now we are seeing the impact of or effect of tariff on world price and terms of trade.
A country imposes a tariff on a good to reduce the quantity of imports from foreign country to the domestic country. When a tariff is imposed the price of imported goods increases and domestic consumers will buy to tend more of domestic goods and less of foreign goods. The tax in the form of tariff goes to the goverment and the domestic producers will also benefit due to the less competition from foreign markets.
The domestic consumers will face loss due to increase in the world price of that good both in domestic and foreign market.
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