Let us assume that the free trade price of laptop monitors is $100 and that the US levies a specific tax of $10. Let us say that the domestic price of laptops rise to $105 (The US is a large country). At the free trade price, the US produces 8 thousand units per week, and imports 16 thousand units. At the higher price of $105, domestic production rises to 10 thousand units per week and imports fall to 10 thousand units.

Draw the graphs for the U.S. and the exporting country and calculate the following for the U.S.

1. (i)Change in Consumer Surplus
2. (ii)Change in Producer Surplus
3. (iii)Dead weight loss
4. (iv)Gain for the US from the trading partner.
5. (v)Net Gain/Loss for the US.