The following graph shows the domestic demand for and supply of maize in Bangladesh. The world price (Pw) of maize is $250 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 maize and that there are no transportation or transaction costs associated with international trade in maize. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.
The following graph shows the domestic demand for and supply of maize in Bangladesh. The world price (Pw) of maize is $250 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 maize and that there are no transportation or transaction costs associated with international trade in maize. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.
Chapter1: Making Economics Decisions
Section: Chapter Questions
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Transcribed Image Text:**4. Effects of a tariff on international trade**
The following graph shows the domestic demand for and supply of maize in Bangladesh. The world price (\( P_W \)) of maize is $250 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 maize and that there are no transportation or transaction costs associated with international trade in maize. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.
**Graph Explanation:**
- The graph illustrates the relationship between the price and quantity of maize in Bangladesh.
- The blue line represents Domestic Demand, which slopes downward, indicating that as price decreases, the quantity demanded increases.
- The orange line represents Domestic Supply, which slopes upward, indicating that as price increases, the quantity supplied increases.
- The black horizontal line at $250 represents the World Price (\( P_W \)), indicating the constant world price of maize per ton.
- The x-axis denotes the quantity of maize in tons, increasing from left to right.
- The y-axis denotes the price in dollars per ton, increasing from bottom to top.
The intersection of the supply and demand curves indicates the equilibrium price and quantity in a closed economy. The horizontal line shows how the world price compares to the domestic market conditions, indicating potential scenarios for importing or exporting maize depending on domestic supply and demand conditions.
Transcribed Image Text:**Homework (Ch 09)**
**Graph Explanation:**
The graph illustrates the relationship between domestic demand and domestic supply for maize in terms of quantity (in tons) and price (in dollars per ton).
- **X-Axis (Quantity):** Displays the quantity of maize in tons, ranging from 0 to 500.
- **Y-Axis (Price):** Displays the price in dollars per ton, ranging from $200 to $450.
- **Domestic Demand Curve (Blue):** Shows the downward-sloping curve indicating that as the price decreases, the quantity demanded increases.
- **Domestic Supply Curve (Orange):** Displays the upward-sloping curve indicating that as the price increases, the quantity supplied increases.
- **Horizontal Black Line:** Represents the world price level, labeled as Pw, where imports occur. Significant equilibrium points on this line help determine the quantity of imports.
**Questions:**
1. If Bangladesh is open to international trade in maize without any restrictions, it will import ___ tons of maize.
2. Suppose the Bangladeshi government wants to reduce imports to exactly 200 tons of maize to help domestic producers. A tariff of $___ per ton will achieve this.
3. A tariff set at this level would raise $___ in revenue for the Bangladeshi government.
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