Question
The world price (P w ) of wet wipes is $2 per box and is represented by the black line. Assume that the amount demanded
The world price (Pw) of wet wipes is $2 per box and is represented by the black line. Assume that the amount demanded by any country doesn't effect the world price and there are no transportation costs associated with international trade. Also assume that domestic suppliers of wet wipes will satisfy domestic demand before any exporting or importing of excess product takes place.
If the U.S. allows for international trade of wet wipes, how many boxes will be imported?
If the U.S. wants to reduce imports by half, what tariff price will achieve this goal?
How much revenue does this tariff produce for the U.S. government?
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