Question

The following graph shows the domestic supply of and demand for oranges in Jordan. The world price (PW) of oranges is $760 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 oranges and that there are no transportation or transaction costs associated with international trade in oranges. Also, assume that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place.

If Jordan is open to international trade in oranges without any restrictions, it will import _____ tons of oranges.

Suppose the Jordanian government wants to reduce imports to exactly 80 tons of oranges to help domestic producers. A tariff of $___ per ton will achieve this.

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

ere are no transportation or transaction costs assocated with intematonartroen oranges. So, a that domestic suppliers will satisfy domestic demand as much as possible before any exporting or importing takes place 1165 Domestic Demand Domestic Supply PRICE (Dollars per ton) 0 40 80 300 120 100 200 240 280 320 QUANTITY (Tons of oranges) If Jordan is open to international trade in oranges without any restrictions, it will import tons of oranges.

Answer 1

At a world price of $760, quantity demanded is 360 tons of oranges and quantity supplied is 40 tons.

Since quantity demanded is less than the quantity supplied, there will be import.

Import = Quantity demanded - quantity supplied

Import = 360 - 40

Import = 320.

If Jordan is open to international trade in oranges without any restrictions, it will import 320 tons of oranges.

At a world price of $895, quantity demanded is 240 tons of oranges and quantity supplied is 160 tons.

Import = Quantity demanded - Quantity supplied.

Import = 240 - 160

Import = 80.

Hence, at a world price of $895 there is an import of 80 tons

To increase the world price from $760 to $895, there is a need to impose a tariff of $135.

Suppose the Jordanian government wants to reduce imports to exactly 80 tons of oranges to help domestic producers. A tariff of $135 per ton will achieve this.

Government revenue = Tariff * Import

Government revenue = ($135) (80)

Government revenue = $10800

A tariff set at this level would raise $10800 in revenue for the Jordanian government.