12.8

d. Show that the increase in producer surplus is precisely equal to the increase in royalties paid as Q expands incrementally from its level in part

(b) to its level in part (c).

e. Suppose that the government institutes a $5.50 per-film tax on the film copying industry. Assuming that the demand for copied films is that given in part (a), how will this tax affect the market equilibrium?

f. How will the burden of this tax be allocated between consumers and producers? What will be the loss of consumer and producer surplus? g. Show that the loss of producer surplus as a result of this tax is borne completely by the film studios. Explain your result intuitively. The domestic demand for portable radios is given by Q = 5,000 - 100P, where price (P) is measured in dollars and quantity (Q) is measured in thousands of radios per year. The domestic supply curve for radios is given by Q=150P.

a. What is the domestic equilibrium in the portable radio market?

b. Suppose portable radios can be imported at a world price of $10 per radio. If trade were un- encumbered, what would the new market equilibrium be? How many portable radios would be imported?

c. If domestic portable radio producers succeeded in having a $5 tariff implemented, how would this change the market equilibrium? How much would be collected in tariff revenues? How much consumer surplus would be transferred to domestic producers? What would the dead- weight loss from the tariff be?

d. How would your results from part

(c) be changed if the government reached an agreement with foreign suppliers to "voluntarily" limit the portable radios they export to 1,250,000 per year? Explain how this differs from the case of a tariff.