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The following graph shows the domestic demand for and supply of lemons in Panama. The world price (Pw) of lemons is $260 per ton and
The following graph shows the domestic demand for and supply of lemons in Panama. The world price (Pw) of lemons is $260 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 lemons and that there are no transportation or transaction costs associated with international trade in lemons. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. (?) 420 Domestic Demand Domestic Supply 400 380 380 340 PRICE (Dollars per ton) 320 300 280 280 240 220 50 100 150 200 250 300 350 400 450 500 QUANTITY (Tons of lemons) If Panama is open to international trade in lemons without any restrictions, it will import tons of lemons. Suppose the Panamanian government wants to reduce imports to exactly 200 tons of lemons to help domestic producers. A tariff of $ per ton will achieve this. A tariff set at this level would raise $ in revenue for the Panamanian government
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