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Can you help with this economics question (international trade) Suppose a small country can import food at a world price of $200 per ton. In
Can you help with this economics question (international trade)
Suppose a small country can import "food" at a world price of $200 per ton. In addition, there is a positive production externality from domestic food production that producers cannot appropriate. Assume that each unit of food produced yields a marginal external social benefit of $50. Assume that at a price of $200, domestic quantity-demanded equals 200 million tons, and domestic quantity-supplied equals 100 million tons. Assume that for every $10 that price changes, quantity-supplied changes by 3 million tons, and quantity-demanded changed by 2 million tons. a. What is the domestic equilibrium price that would have prevailed without trade? [0. 5 point] b. After having free trade for several years, now suppose the small country's government imposed a $20 tariff on food imports. Calculate the following: [1 x 5=5 points] i. the change in producer surplus, ii. the change in consumer surplus, iii. the change in the government budget, and iv. the change in the external social benefit from production v. the overall impact of tariff on domestic welfare c. Assume instead of the tariff that the country pays a production subsidy of $20 per ton of food to domestic food producers. Calculate the following: [1 x 4=4 points] i. the change in producer surplus, ii. the change in consumer surplus, iii. the change in the government budget, and the change in the external social benefit from production iv. the overall impact of tariff on domestic welfare d. Is the country better off with a tariff or with the production subsidy? [0.5 points]Step by Step Solution
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