Question
The accompanying diagram shows the effects of a tariff. Initially, the price is Po, domestic firms produce Qo units, and Q - Qo units
The accompanying diagram shows the effects of a tariff. Initially, the price is Po, domestic firms produce Qo units, and Q - Qo units are imported from foreign firms. When the tariff is imposed, the price increases to Po+t. Price Po+ Po C A B [1] E F S D - Quantity a) Show the consumers' surplus and producers' surplus before tariff is imposed. [10'] b) Show the consumers' surplus and producers' surplus after tariff is imposed. [10'] c) How does the tariff affect consumers' surplus and producers' surplus? [10'] d) How much tariff revenue is collected by the government? [10'] e) Does imposing the tariff cause the country's social gain to rise or fall? [5']
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Cost Benefit Analysis Concepts and Practice
Authors: Anthony Boardman, David Greenberg, Aidan Vining, David Weimer
4th edition
137002696, 978-1108448284, 1108448283, 978-0137002696
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