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The figure below shows the national market for mopeds in a small country. Da and Sa are the domestic demand and supply curves of mopeds,
The figure below shows the national market for mopeds in a small country. Da and Sa are the domestic demand and supply curves of mopeds, respectively. Initially, the country's government has a tariff on imports of mopeds. Price $800 - Domestic price line after tariff $750 World price line 0.5 0.6 Quantity (Millions of mopeds per year) The figure below shows the marginal external benefit curve (MEB) of the country from the production of domestic mopeds. Marginal External Benefit $140 $125 MEB 0.5 0.6 Quantity O (Millions of mopeds per year) What will be the impact on the national well-being if, instead of imposing a tariff of $50 per unit, the government provides a subsidy of $50 per unit to the domestic manufacturers of mopeds? 4
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