4. Effects of a tariff on international tradeThe following graph shows the domestic demand for and supply of limes in Zambia. The world price (Pw) of limes is $780 per ton and is displayed asa horizontal black line. Throughout the question, assume that all countries under consideration are small, that is, the amount demanded by any onecountry does not affect the world price of limes and that there are no transportation or transaction costs associated with international trade in limes.Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.PRICE (Dolars per ton)118511401095105010050009158708257007350Domestic Demand400Domestic Supply120 180 200 240 280 320 300 400QUANTITY (Tons of limes) If Zambia is open to international trade in limes without any restrictions, it will importSuppose the Zambian government wants to reduce imports to exactly 160 tons of limes to help domestic producers. A tariff ofachieve this.A tariff set at this level would raisetons of limesin revenue for the Zambian government.per ton will

Import is the difference between the domestic demand and domestic supply. Import = Quantity demanded…

If Zambia is open to international trade in limes without any restrictions, it will import Suppose the Zambian government wants to reduce imports to exactly 160 tons of limes to help domestic producers. A tariff of achieve this. A tariff set at this level would raise tons of limes in revenue for the Zambian government. per ton will

If Zambia is open to international trade in limes without any restrictions, it will import Suppose the Zambian government wants to reduce imports to exactly 160 tons of limes to help domestic producers. A tariff of achieve this. A tariff set at this level would raise tons of limes in revenue for the Zambian government. per ton will

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Chapter1: Making Economics Decisions

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Question

4. Effects of a tariff on international trade
The following graph shows the domestic demand for and supply of limes in Zambia. The world price (Pw) of limes is $780 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 limes and that there are no transportation or transaction costs associated with international trade in limes.
Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.
PRICE (Dolars per ton)
1185
1140
1095
1050
1005
000
915
870
825
700
735
0
Domestic Demand
4
00
Domestic Supply
120 180 200 240 280 320 300 400
QUANTITY (Tons of limes)

If Zambia is open to international trade in limes without any restrictions, it will import
Suppose the Zambian government wants to reduce imports to exactly 160 tons of limes to help domestic producers. A tariff of
achieve this.
A tariff set at this level would raise
tons of limes
in revenue for the Zambian government.
per ton will

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