Homework $($Ch $09)$

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$4.$ Effects of a tariff on international trade

The following graph shows the domestic demand for and supply of maize in Bandadesh. The world price $($ P w$)$ of maize is $$255$ 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 maize and that there are no transportation or transaction costs associated with international trade in maize. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.

If Bangladesh is open to international trade in maize without any restrictions, it will import $$ tons of maize.

Suppose the Bangladeshi government wants to reduce imports to exactly $60$ tons of maize to help domestic producers. A tariff of $$ per ton will achieve this.

A tariff set at this level would raise $$ in revenue for the Bangladeshi government.

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