Question

Assume that Canada has the following supply and demand curves for milk where the quantity is measured in millions of gallons of milk and price is measured as price per gallon of milk. Supply: Qs = (1/4)P Demand: Qd = 45 - (1/8)P a. What is the domestic equilibrium for price and quantity for milk in Canada? Answer: Equilibrium price is [ Select ] Equilibrium quantity is [ Select ] b. Assume that Canada decides to open its markets to foreign trade and that the world price for milk is $60. Is Canada exporting or importing milk? Answer: Canada is [ Select ] milk c. With the world price of $60, what is the consumer and producer surplus in the milk market now that Canada has open to international trade? Answer: Consumer surplus is [ Select ] Producer surplus is [ Select ] d. The Canadian government is worried that milk farmers in Canada may not be benefiting from international trade and Canada would like to reduce its dependence on foreign milk. To achieve this goal, the Canadian government places a tariff on imported milk of $20 per gallon of milk. What is the deadweight loss from this tariff? What is the government revenue from this tariff? Answer: Deadweight loss from tariff is [ Select ] Government revenue from tariff is [ Select ]