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)