Suppose that Indonesia and Australia are the only two countries in the world tha
ID: 1139960 • Letter: S
Question
Suppose that Indonesia and Australia are the only two countries in the world that trade wheat. The following graph shows the world market for wheat, where X is Australia's export supply and M is Indonesia's import demand: PRICE (Dollars per tonl 480 Free Trade Equil. 400 Equil. with Tariff X-Supply w/Tariff 320 DWL in Indonesia 240 TOT Gain/Loss 160 DWL in Australia 80 QUANTITY (Millions of tons HelpClear All On the previous graph, use the black point (X symbol) to indicate the equilibrium in the world market for wheat. Dashed drop lines will automatically extend to both axes Now, suppose Indonesia's government imposes a $160-per-ton tariff on wheat imports. On the previous graph, use the orange line (square symbols) to draw the export supply curve with the tariff. Next, place two purple points (diamond symbol) to indicate the new equilibrium with the tariff: Specifically, place one purple point at the price Indonesian consumers pay for imported wheat and the quantity of wheat they import, and place the second at the price Australian wheat producers receive for wheat and the quantity they export to Indonesia Without the tariff, the world price of wheat was per ton. Under the tariff, Indonesian consumers pay per ton and Australian wheat producers receive per ton Since Indonesia is a large country, it experiences a needs to pay Australia green quadrilateral (triangle symbols) to shade the area that represents this terms-of-trade effect. because the tariff it imposes means it for wheat than before the tariff was imposed. On the previous graph, use theExplanation / Answer
without the tariff , the world price of wheat was $220 per ton. Under the tariff indonIndo consumer pay $260 per ton and Australian wheat producers receive $200 per ton .
Since indoneInd is a large country , it experience a terms-of-trade-gain because the tariff it imposes means it need to pay Australian less for wheat than before the tariff was imposes.