Question
Hi, can you please explain the steps required to calculate these questions? Let's assume the demand and supply functions for mid-sized cars in Australia was
Hi, can you please explain the steps required to calculate these questions?
Let's assume the demand and supply functions for mid-sized cars in Australia was given by:
QD = 100,000 - 5P
QS = 10P - 50,000
If the world price for a mid-sized car was $6,000, calculate the total surplus under (i) no trade; (ii) trade but no tariff; and (iii) trade with a $2,000 tariff placed on each car. What would have been the value of international trade to the Australian economy under scenario (ii) versus (i)? What is the government revenue earned from the tariff under scenario (iii)? What would be the size of the deadweight loss from this tariff compared to trade without tariff (if any)?
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