2. Assume you are working for the US government. The US governments need to raise revenues from the Clothing market, and you are assigned to study the cotton shirt market. You have access to the previous data: - IfP = 20 then 0'1 = so. IfP = 30 then Q01 = 70. - If P = 20 then 03 = 25. If P: 30 then 05 = 40. The US government needs at least 200 dollars of revenues raised from this market. If you raise more than that the government will accept the money but the president prefers you only raise that amount. So, try not to make people pay too much unless you must. (Government revenue >= 200) a.) First you try to impose a tax. You consider imposing T dollars tax on each shirt being sold. You can impose this tax on buyers or the sellers. Which one do you prefer? How much will be the tax imposed on each shirt? How much will the consumer surplus and producer surplus in this market change after you introduce this tax? (25 points) [1.) Now assume that the government just signed a free trade agreement with Japan. This means that the shirt market is operating under free trade now. Instead of taxing the market now you can impose a tariff to raise revenues for the government while protecting the domestic producers. How much will be tariff you impose on foreign made shirts? How much will the consumer surplus and producer surplus change after you impose this tariff. Is this solution more efficient that taxing the market? (25 points)