South Korea is one of the major beef importing countries. With no international trade, Korea’s equilibrium price for beef was $10 million per kilo tonne and equilibrium quantity was 30 kilo tonne. If Korea opens its market to international trade with no tariff, domestic supply would be 10 kilo tonne and domestic demand would be 50 kilo tonne at the world price of $5 million per kilo tonne. However, Korea currently imposes 40 per cent tariff rate on all imported beef. With 40 per cent tariff, Korea’s domestic supply and domestic demand are 20 kilo tonne and 40 kilo tonne respectively. Assume that intercept of supply curve is $3 million and demand curve is $15 million per kilo tonne.
Analyse the effects of 40 per cent tariff rate in Korea on the price, domestic supply and demand, and beef imports in comparison with no tariff case.
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