3. Let us consider an open economy at time period i with no trade restrictions. At time period 2, this country decides to implement an import tariff f (in US dollars) to protect its steel industry. Steel is a metal alloy sold on international markets at world prices PW (in US dollars). The impact of this tariff on the domestic economy can be shown in Figure 1. On this chart, S, and $2 represent quantities supplied (in tons) at times 1 and 2, respectively. Likewise, D, and D2 represent quantities demanded (in tons) at times 1 and 2, respectively. Price (5) Supply A PW Demand Quantity 51 52 D2 Di (tons of steel) Figure 1: Impact of the tariff on the domestic steel market (a) Is this economy small or large? Explain. (b) In Figure 1, what are the imports M, (before the tariff) and My (after the tariff)? No explanations are needed. (c) Let us conduct a welfare analysis before the tariff is adopted. (No explanations are needed). i. What is the consumer surplus? ii. What is the producer surplus? iii. What is the government surplus? iv. What is total welfare? No explanations are needed. (d) Let us conduct a welfare analysis after the tariff is adopted. (No explanations are needed). i. What is the consumer surplus? ii. What is the producer surplus? iii. What is the government surplus? iv. What is total welfare? (e) How would you measure the deadweight loss from a tariff (in US dollars)? (f) In a few sentences, describe why certain policymakers implement import tariffs even though they tend to generate deadweight losses