Exercise 1 (25 points) In a certain insular kingdom near a large continent, the demand for food is given by the following function: QD=100p where p is the price of food in the kingdom. The supply of food consists of the sum of the production by domestic rms (domes- . . . . . 2 t1c supply) and rms from the continent. The domestic supply 15 given by 62'; = 7'\". Moreover, the supply (in the kingdom) by rms from the continent is given by Qfg = g. (a) (5 points) What is the aggregate supply of food in the kingdom as a function of p? What will be the total quantity of food consumed in equilibrium? What is the quantity produced by domestic rms, and the quantity produced by rms from the continent? (5 points) What will be the consumer surplus in equilibrium? What is the producer surplus for domestic producers, and what is the surplus of continent producers? (7 points) Now suppose that the kingdom's government starts charging rms from the continent (and only those from the continent) a tax of $10 per unit of food produced. What will be the aggregate supply of the good as a function of the price p (i.e., from the consumer's perspective)? What will be the new equilibrium (prices and quantities)? What is the total tax revenue? (8 points) Now, suppose that, in a plebiscite, the kingdom's residents decide to prohibit the consumption of production by rms from the continent. What will be the new equilibrium (price and quantities)? What are the surpluses of domestic producers and consumers? What is the deadweight loss generated by this policy (taking the case in (b) as a reference)? Who are the winners and losers (compared to (b))? Illustrate your answer graphically