Calculate the market price of imported wheat

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Reference no: EM131419778

A certain developing country currently imports all its wheat but is considering funding an irrigation project that would allow domestic farmers to grow and sell wheat. The domestically grown wheat would be sold in competitive markets at an estimated price of 15 dubyas per bushel. The wheat the nation currently imports has a CIF price of US$3 per bushel. The official exchange rate is 4 dubyas per dollar. The nation's tariff on imported wheat is 2 dubyas per bushel. Transportation and distribution charges from the port to a typical market are 2 dubyas and 1 dubya per bushel, respectively.The APR has been estimated to be 0.6 for transportation and 0.8 for distribution.

a. Calculate the market price of imported wheat.

b. Calculated the shadow price of imported wheat.

c. Should the irrigation project proceed?

Reference no: EM131419778

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