1.Suppose that the domestic demand for a given product (X) is given by X ^D =10 P.

This product is only produced by a foreign monopoly, with a constant marginal cost of

MC = 2.

a) Assuming that the foreign firm fully explores its monopoly power, at which price will it sell X in the domestic market?

Now assume that the domestic government imposes a specific tariff of 2 Euros per imported unit.

b) What will be the optimal price policy for the foreign monopoly in this case?

c) Compute the consumer loss.

d) Compute the government revenue.