Suppose initially Malaysia does not trade shuttlecocks. The market for shuttlecocks in Malaysia is perfectly competitive. The domestic demand curve for shuttlecocks is downward slopping. The domestic supply curve is perfectly elastic at a price of RM3 per shuttlecock, up to a quantity of 5000 shuttlecocks. Then the domestic supply curve is perfectly inelastic at the quantity of 5000 shuttlecocks. The perfectly competitive market price for shuttlecocks inMalaysia is RM5 per unit.

Note: Please use a separate diagram for each part of the question.

(a)Using an appropriate diagram, illustrate the market for shuttlecocks in Malaysia without international trade. In your diagram, indicate the area of consumer surplus, producer surplus and social surplus. (2 marks)

(b)Suppose Malaysia starts to trade shuttlecocks with the rest of the world. The world price of shuttlecocks is RM8 per unit. Using a diagram, illustrate the market for shuttlecocks when Malaysia trades with the rest of the world, show any imports or exports of shuttlecocks. Who gains and who loses from Malaysia's international trade in shuttlecocks and why? (3 marks)

Suppose the government decides to impose a RM2 tax per shuttlecock on the domestic production shuttlecocks whether they are sold domestically or overseas. Are Malaysian consumers or producers worse off due to the tax? How much revenue will the government make from the tax? What is the effect on social surplus? Explain your answer fully using an appropriate diagram.