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A country has a demand for aluminum that can be described by P = 200 - 2 Q. The country's costs for producing aluminum are
A country has a demand for aluminum that can be described by P = 200 - 2Q. The country's costs for producing aluminum are given by MC = 40 + 2Q. The world market has a perfectly elastic range of aluminum price at a price of 60. The country has had free trade with the outside world but faces a customs duty on aluminum of 20. Illustrate the situation graphically, calculate trade volumes before and after the introduction of customs, illustrate and calculate customs welfare effects for all groups within the country.
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