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The Figure below illustrates the demand and supply schedules for pocket calculators in Mexico, a small nation that is unable to affect the world price.
The Figure below illustrates the demand and supply schedules for pocket calculators in Mexico, a "small" nation that is unable to affect the world price. Figure: Import Tariff Levied by a "Small" Country 14 SMexico B 6 Price world+ Tarrill Price world DMexico 10 40 60 80 110 Pocket Calculators Consider the Figure above: a. In the absence of trade, how many pocket calculators does Mexico produce and consumes? At what price? b. In the absence of trade, calculate Mexico's producer surplus and consumer surplus. Compute the total surplus. c. With free trade (i.e. at Priceworld) , what is the world price of pocket calculators? At that price, how many pocket calculators does Mexico produce? How many pocket calculators doe the consumers buy? How many calculators are imported? d. With free trade, calculate Mexico's producer surplus and consumer surplus. Compute the total surplus. e. With a per-unit tariff of $3, how many calculators are imported? How much revenue will the government collect? f. Compute the total deadweight cost of the tariff
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