## DragIT - Intervention in agricultural markets

Added to the problems of price fluctuations and relative declining income that they have faced, most European farmers have also suffered from growing competition from other food-exporting nations around the world (e.g. USA, Canada, Australia and parts of Africa). One solution to this specific problem would be to set a tariff on all imported products that compete directly with domestic producers.

The following diagram shows the domestic demand and supply for wheat in a given country. The world price of wheat is £3 per tonne (shown by the horizontal red line).

1

##### Import tariff

What will be the level of domestic production at a world price of £3 per tonne?

 a) 5,000 tonnes per annum b) 15,000 tonnes per annum c) 25,000 tonnes per annum d) 35,000 tonnes per annum Yes, that's correct. Domestic production occurs where the domestic supply curve meets the world price. This is at a quantity of 15,000 tonnes.No, that's not right. Domestic production occurs where the domestic supply curve meets the world price. This is at a quantity of 15,000 tonnes.Your answer has been saved.

2

##### Import tariff

What will be the level of imports at a world price of £3 per tonne?

 a) 15,000 tonnes per annum b) 20,000 tonnes per annum c) 25,000 tonnes per annum d) 30,000 tonnes per annum Yes, that's correct. It is 35,000 demanded - 15,000 supplied domestically.No, that's not right. It is 35,000 demanded - 15,000 supplied domestically.Your answer has been saved.

3

##### Import tariff

What will be the level of imports at a world price of £4 per tonne?

 a) 10,000 tonnes per annum b) 20,000 tonnes per annum c) 25,000 tonnes per annum d) 30,000 tonnes per annum Yes, that's correct. It is 30,000 demanded - 20,000 supplied domestically.No, that's not right. It is 30,000 demanded - 20,000 supplied domestically.Your answer has been saved.