INTERNATIONAL TRADE WORKSHEET   This question examines the market for bananas

INTERNATIONAL TRADE WORKSHEET

This question examines the market for bananas. You will use the quantity demanded and the quantity supplied at different prices to identify the equilibrium price. Additionally, you will investigate the role of international trade when the world price is below the market equilibrium price and analyze the impact of a tariff.

Below, you are provided with the quantity of bananas demanded and supplied.  This data is obtained from points on the demand and supply curves in the market for bananas.

Task 1: Assume that the market is not open to trade. What is the equilibrium price of a pound of bananas? At this price, what is the quantity of bananas demanded and what is the quantity of bananas supplied?

Task 2: Assume that the market is open to trade and that the world price is $2. At this price, what is the quantity of bananas demanded by domestic consumers and what is the quantity of bananas supplied by domestic producers?

Task 3: Assuming that the market is open to trade and that the world price is $2, does this country import or export bananas? How many?

Task 4: Assume that the market is open to trade, the world price is $2, and the government imposes a tariff on imports of bananas of $2 per pound. At this world price and tariff amount, what is the quantity of bananas demanded by domestic consumers and what is the quantity of bananas supplied by domestic producers?

Task 5: Assuming that the market is open to trade, the world price is $2, and there is a $2/pound tariff on bananas, does this country import or export bananas? How many?

Task 6: When the government places a tariff on imports, do larger tariffs lead to more or less imports?

Task 7: What is the maximum tariff that the government could impose in this banana market before domestic consumers would stop importing bananas?