Question
The domestic demand for calculators is given by = , and the domestic supply is given by = . The world price for a calculator
The domestic demand for calculators is given by = , and the domestic supply is given by = . The world price for a calculator is $10 per unit, and the government is currently imposing a tariff of $10 on each imported calculator. 1) Suppose there is a free trade, how many units of calculators will be imported? ( 5 marks) 2) Suppose the government decided to lower the tariff from $10 to $5 per calculator. Calculate the change in consumer surplus, the change in the producer surplus, and the change in the government revenue due to lowering the tariff from $10 to $5? [Hint: to get the change in the surplus and government revenue, you need to get the surplus and the government revenue when the tariff was $10 and the surplus and government revenue when the tariff became $5 and get the difference between the two] (15 marks) 3) How much is the deadweight loss resulting from this $5 tariff per calculator? (5 marks)
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