Q2:

Consider a small country with the following demand and supply for tamales

Demand: Q = 70-10P

Supply:Q = 10+10P

Suppose the world price for tamales is $1.

a) How many tamales will the country import.

b) Consider a tariff of $1 per tamale. How many tamales will the country import with the tariff?

c) Calculate each of the following:

c1) Dead weight loss due to production distortion created by the tariffs.

c2) Dead weight loss due to consumption distortion created by the tariffs.

c3) Government revenue from the tariff

c4) Change in producer surplus created by the tariff

c5) Explain what happen to overall welfare in the country