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The following graph shows the domestic demand for and supply of limes in New Zealand. The world price (PW ) of limes is $810 per
The following graph shows the domestic demand for and supply of limes in New Zealand. The world price (PW ) of limes is $810 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. A graph plots domestic supply and demand for limes in New Zealand with price in dollars per ton on the y-axis ranging from 730 to 1130 in increments of 40 and quantity in tons of limes on the x-axis ranging from 0 to 500 in increments of 50. The graph plots a downward sloping straight line curve labeled domestic demand ranging from (0, 1130) to (500, 730), and an upward sloping straight line curve labeled domestic supply ranging from (0, 730) to (500, 1130). A horizontal line labeled P sub W extends from (0, 810) to (500, 810), intersecting the domestic supply curve
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