The domestic supply curve...


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3. A small country can import a good at a world price of 10 per unit. The domestic supply curve of the good is S = 20 + 10P, D = 400 - 5P.
In addition, each unit of production yields a marginal social benefit of 10.
Now, suppose demand and supply are exactly as described in problem 3, but there is no marginal social benefit to production. However, for political reasons the government counts a dollar's worth of gain to producers as being worth $3 of either consumer gain or government revenue. Calculate the effects on the government's objective of a tariff of 5 per unit.
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Solution ID:351110 | This paper was updated on 26-Nov-2015

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