Question

Below is a graph illustrating the market for mustard seeds in Rysen III. (Sd is domestic supply, and Dd is domestic demand.). The world price of mustard seeds is $100. $240 Price per ton 400 m 800 1200 1600 2000 2400 Quantity of Mustard Seeds 28. Refer to the graph above to answer this question. Suppose that the government introduces a quota of 400 on imports of mustard seeds, what will be the new price?? A) $40. B) $100. C) $120. D) $140. E) Cannot be determined. 29. Refer to the graph above to answer this question. Suppose that the government introduces a tariff of $20 on mustard seeds. What will be the new price? A) $100. B) $120. C) $130. D) $140. E) $150. 30. Refer to the graph above to answer this question. After the introduction of a $20 tariff, what is the value of the tax revenue collected by the Rysen III government? A) $8000. B) 514 000. C) $16 000. D) $24000. E) $48000. 31. A country has favourable terms of trade when: A) The average price of its exports increases relatively more than does the average price of its imports. The average value of its imports increases relatively more than does the average value of its exports. C) The average volume of its exports decreases more than does the average volume of its imports. D) The average price of its imports increases relatively more than does the average price of its exports.

Answer 1

28. Option C

The new supply curve would be domestic supply + quota. So, the new equilibrium is the intersection of the new supply curve and the old demand curve which is at $120

Sd+Quota Price per ton Od 0 400 800 1200 1600 2000 2400 Quantity of Mustard Seeds

29. Option E. It is the at the intersection of Sd+tariff and demand cirve

Sd+tariff $240 Price per ton 0 400 800 1200 1600 2000 2400 Quantity of Mustard Seeds

30. Option D)

The tax revenue = tax*new equilibrium quantity = 20*1300 = $26000

31. Option A. As it would earn positive profits from the trade and balance of payments increases