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The nation of Georgia is small, unable to affect the world price of rice. The domestic demand curve for rice is D=800-P & the supply
The nation of Georgia is "small", unable to affect the world price of rice. The domestic demand curve for rice is D=800-P & the supply curve is S=100+ 2P. The nation currently imports rice at the price of $100 per bag. There is a domestic market failure due to a positive production externality from domestic rice production that producers cannot appropriate. Assume that each unit of rice produced yields a marginal external social benefit of $20. As an analyst working for the government, your task is to recommend either a tariff of $20 per bag (a trade policy) or a production subsidy of $20 per bag (a domestic policy) to address the domestic market failure in this case. To figure out which policy increases national welfare more, please calculate the following: a. the domestic equilibrium price that would have prevailed without trade? [O. 5 point] b. With a tariff of $20 per bag, i. the change in producer surplus, ii. the change in consumer surplus, ili. the change in the government budget, and iv. the change in the external social benefit from production v. the overall impact of tariff on domestic welfare C. With a production subsidy of $20 post bag i. the change in producer surplus, ii. the change in consumer surplus, ili. the change in the government budget, and iv. the change in the external social benefit from production v. the overall impact of tariff on domestic welfare D. Is the country better off south the raid or the production subsidy
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