Even though Britains climate is quite conducive for mushroom production and collection, domestic demand exceeds domestic supply. Therefore, the country imports huge amounts of mushroom from Denmark (40%), Chile(40%) and Russia (20%). Britain already has a free trade agreement with Denmark but not with the other two countries.

UK mushroom producers can be divided into two large groups: small producers and those that produce on large farms. Large farms can be operated more efficiently thanks for economies of scale. Consumers can also be divided into two main groups: small retailers, who mostly buy from local producers and larger retailers, who also import mushrooms.

Domestic demand and supply were estimated with sophisticated statistical techniques and machine learning. According to these estimated, domestic demand in the UK market is:

D: p=1000-5q

Domestic supply is:

S: p=200+15q

The world price is p_w=400.

tariff is 75

THE QUESTION I HAVE TO ANSWER IS:

1. Please summarize the main arguments for and against the tariff. The government is interested both in how the tariff will affect welfare but also in how the tariffs will affect them politically.