2. Large Country Tariff (13 points total) Consider the following demand and supply system for country D (assume country D is large): Country Ds demand for pizza is: QD= 16 PD. Country Ds supply for pizza is: QD= PD2.

a) Suppose the rest of the worlds pizza export supply is given by XS= 2P2 and Country D is open to free trade. How many pizzas would Country D import? What is the gain from trade for Country D?(3 points)

b) Suppose the government of Country D wants to impose a $1 per unit tariff on im- ported pizza. How many pizzas will be imported after the tariff policy? (3 points)

c) On a demand-supply graph, clearly label the following items: consumer surplus, pro- ducer surplus, and government revenue after the tariff policy. (4 points)

d) Calculate Country Ds terms-of-trade gain and net welfare change after the tariff pol- icy. (3 points)