Question
The country of Maldovia is considering imposing a new tariff on imported cars to protect it's domestic manufacturing. Let domestic supply be S(p) =p and
The country of Maldovia is considering imposing a new tariff on imported cars to protect it's domestic manufacturing. Let domestic supply be S(p) =p and domestic demand be D(p)=100 p.
b) Suppose that foreign supply is no longer perfectly elastic, but is given by Sf = 2P 60.
i) Calculate total supply as a function of price.
ii) Draw a graph showing demand and domestic and the total supply curves.
iii) With no tariff, how many cars will Maldovia produce and import?
iv) If the government imposes a 10% ad valorem tariff, how does this change market supply?
v) Draw the new market supply, and calculate domestic production, imports, consumer surplus, domestic producer surplus, and government revenue.
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