The small happy Kingdom of Pollyanna does not trade with the rest of the world, but uses
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Question:
The small happy Kingdom of Pollyanna does not trade with the rest of the world, but uses U.S dollars for its currency. Its domestic price of tofu is $1 per pound and the Kingdom produces and consumes 5 tons of tofu. The world price of tofu is just $0.50 per pound. At this price, the Kingdom would produce only 2 tons of tofu and would consume 8 tons of tofu, and thus have to import 6 tons of tofu. Suppose the Kingdom decides to open up to trade, but imposes a tariff of 0.25/lb on all imports of tofu. How much money does the Kingdom collect from this tariff?
Related Book For
Intermediate Accounting
ISBN: 978-0324592375
17th Edition
Authors: James D. Stice, Earl K. Stice, Fred Skousen
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