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Coffee is freely traded in the world market. Assume that Honduras is a price taker in the world market for coffee. Some of the coffee

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Coffee is freely traded in the world market. Assume that Honduras is a price taker in the world market for coffee. Some of the coffee consumed in Honduras is produced domestically while the rest is imported. The world price of coffee is $2 per pound. The graph below shows Honduras's coffee market, and PW represents the world price. Domestic Supply PW Domestic Demand 0 2 6 8 10 14 MILLIONS OF POUNDS (a) At the world price of $2 per pound, how much coffee is Honduras importing? (b) Suppose that Honduras imposes a per-unit tariff on coffee imports and the new domestic price including the tariff is $4. (i) Identify the new level of domestic production. (ii) Calculate the domestic consumer surplus for Honduras. You must show your work. (iii) Calculate the total tariff revenue collected by the government. You must show your work. (c) Given the world price of $2, what per-unit tariff maximizes the sum of Honduras's domestic consumer surplus and producer surplus

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