(Solved): Effects of a tariff on international trade he following graph shows the domestic demand for and sup ...

Effects of a tariff on international trade he following graph shows the domestic demand for and supply of limes in New Zealand. The world price ( $\mathrm{Pw}$ ) of limes is $\$780$ per ton and is isplayed as a horizontal black line. Throughout the question, assume that all countries under consideration are small, that is, the amount demanded oy any one country does not affect the world price of limes and that there are no transportation or transaction costs associated with international trade in limes. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place. If New Zealand is open to international trade in limes without any restrictions, it will import tons of limes. Suppose the New Zealand government wants to reduce imports to exactly 80 tons of limes to help domestic producers. A tariff of perton wall achieve this. A tariff set at this level would raise in revenue for the New Zealand government.