4. Effects of a tariff on international trade The following graph shows the domestic demand for and supply of lemons in Bangladesh. The world price (Pw) of lemons is $240 per ton and is displayed as a horizontal black line. Throughout the question, assume that all countries under consideration are small, that is, the amount demanded by any one country does not affect the world price of lemons and that there are no transportation or transaction costs associated with international trade in lemons. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. PRICE (Dollars perton) 400 Domestic Demand 300 360 340 320 300 200 200 240 220 200 0 1 I Domestic Supply, 50 100 150 200 250 300 350 QUANTITY (Tons of lemons) 400 450 500

4. Effects of a tariff on international trade The following graph shows the domestic demand for and supply of lemons in Bangladesh. The world price (Pw) of lemons is $240 per ton and is displayed as a horizontal black line. Throughout the question, assume that all countries under consideration are small, that is, the amount demanded by any one country does not affect the world price of lemons and that there are no transportation or transaction costs associated with international trade in lemons. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. PRICE (Dollars perton) 400 Domestic Demand 300 360 340 320 300 200 200 240 220 200 0 1 I Domestic Supply, 50 100 150 200 250 300 350 QUANTITY (Tons of lemons) 400 450 500

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Carefully explain how the imposition of a tariff is different for a large country (that can affect the world price) than a small country. Show your work graphically and explain in words.
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