Guatemala represents a small part of the world poultry market. Assume that the world price of poultry is $0.30 per kilogram. Suppose a $0.10 per kilogram tariff is imposed on poultry imports. Based on the figure below, answer the following.
Homework Answers
a) Under the tariff, quantity consumed = 140 thousand, quantity produced = 60 thousand so imports = 140-60 = 80 thousand
b) At P = 0.40
Quantity bought = 140 thousand
Quantity sold = 60000
Imports = 140-60 = 80 thousand
c) DWL under the tariff = 0.10*20000 = 2 thousand
DWL under the higher price = 0
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