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4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for soybeans in Honduras. The world price
4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for soybeans in Honduras. The world price (PW) of soybeans is $525 per ton and is represented by the horizontal black line. Throughout the question, assume that the amount demanded by any one country does not affect the world price of soybeans and that there are no transportation or transaction costs associated with international trade in soybeans. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. 975 - Domestic Demand Domestic Supply 925 675 -- 825 775 -- 725 675 -- PRICE (Dollars per ton) 625 575 -- p w + I I 475 'l I l l l l l l l I i 0 50 100 150 200 250 300 350 400 450 500 QUANTITY (Tons of soybeans) 525 -+ If Honduras is open to international trade in soybeans without any restrictions, it will import tons of soybeans. Suppose the Honduran government wants to reduce imports to exactly 200 tons of soybeans to help domestic producers. A tariff of per ton will achieve this. A tariff set at this level would raise in revenue for the Honduran government
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