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Assume that the world price of sugar is $6 per pound. At that price, the demand for sugar in the small country of Economica is
Assume that the world price of sugar is $6 per pound. At that price, the demand for sugar in the small country of Economica is 20 and the supply is 10. Economica decides to impose a $2 tariff on sugar. After the tariff, domestic supply is 12 and demand is 18. Use this information to calculate the effect of the tariff on the following:
a. Consumer surplus
b. Tariff revenue
c. Production distortion
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