Suppose in the US there is a competitive market in soy beans that is open to world trade at a world price that leads to consumers purchasing imports from abroad.

(a) Depict this situation graphically. 5 points.

(b) Suppose that the US decides to impose a tariff on imported soybeans, in order to aid domestic soy bean producers. Show graphically how much domestic producers will benefit from this policy. 7 points.

(c) In addition to aiding domestic producers, this policy will raise tariff revenue for the government, show the part on your graph; explain why, despite the gains to domestic producers and benefits to the government tax revenue, the tariff reduces overall welfare. 8 points.