4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for soybeans in Guatemala. The world price (Pw) of soybeans is $550 per ton and is represented...

Extracted text: 4. Effects of a tariff on international trade The following graph shows the domestic supply of and demand for soybeans in Guatemala. The world price (Pw) of soybeans is $550 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. 830 Domestic Demand Domestic Supply 795 760 725 O 690 655 620 585 Pw 550 515 480 30 60 06 120 150 180 210 240 270 300 QUANTITY (Tons of soybeans) PRICE (Dollars per ton)


Extracted text: If Guatemala is open to international trade in soybeans without any restrictions, it will import tons of soybeans. Suppose the Guatemalan government wants to reduce imports to exactly 60 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 Guatemalan government.