Question
Suppose that Australia has a 25% ad valorem import duty on T-shirts and Australian consumers purchase these imported T-shirts at a price of $10 from
Suppose that Australia has a 25% ad valorem import duty on T-shirts and Australian consumers purchase these imported T-shirts at a price of $10 from various fashion outlets. A proposed project would replace 200,000 T-shirts currently imported annually by domestically produced T-shirts. The company hires unemployed domestic labor having an opportunity cost of 20% of the market wage and pays them $600,000 in yearly wages. The project also causes pollution worth $70,000 per year in Australia. The all-inclusive total annual cost of the project at market prices and at efficiency prices is $1 million and $1.25 million respectively. Assuming no other benefits and costs:
a. Calculate the T-shirt price and annual net benefit of the project, according to:
(i). Market analysis
(ii). Efficiency analysis
b. Assuming there are no non-Referent Group stakeholders, would you recommend the project:
(i) to a private sector investor?
(ii) to government who will only allow the private investor to proceed if it believes the project is in the public interest
(Explain your answers clearly)
Step by Step Solution
There are 3 Steps involved in it
Step: 1
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-text-image.webp)
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Step: 3
![blur-text-image](https://dsd5zvtm8ll6.cloudfront.net/includes/images/document_product_info/blur-subtext-image.webp)
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started