Brazil is the world's largest coffee producer. Suppose the functions of domestic supply of and the domestic demand for coffee in that country are given as S^d= 80 + 20P and D^d= 200-20P respectively, while the function of the world supply of coffee is ⁺ = 50 + 100. The supply of and the demand for coffee are measured in million 60 kg bags, while the price is measured in USD.

1) In autarky, what would be the equilibrium price of coffee, the quantity of coffee produced and the quantity of coffee consumed in Brazil?

2) When Brazil opens trade, what would be the equilibrium price of coffee, the quantity of coffee produced and the quantity of coffee consumed?

3) If the country imposes a 72 percent ad valorem tariff on the imported coffee, what is the new function of the world supply of coffee? Next, calculate the equilibrium price, the quantity of coffee produced by domestic firms, the quantity of coffee consumed by the domestic consumers and the quantity of coffee imported?

4) Estimate the loss of domestic consumer surplus from imposition of the tariff.

5) Calculate the redistributive effect, protective effect, tariff effect, consumption effect and term of trade effect from imposition of the tariff.

6) Estimate the revenue gain to the domestic government from imposition of the tariff. Do you expect that the estimate you get would vary in the case of a small country or quota? Explain.

7) Estimate and explain the net effect on the welfare of Brazil's residents from imposition of the coffee tariff.