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The world price of mangoes is US$4 per unit, and almost all of them are produced outside Argentina. Suppose the Argentinian demand curve is: QD
The world price of mangoes is US$4 per unit, and almost all of them are produced outside Argentina. Suppose the Argentinian demand curve is: QD = 400,000 - 40,000P where P is price in US$ per unit, and Q is measured in units. There is an area in the Northern Province of Jujuy that produces some mangoes domestically, so the Argentinian domestic supply curve is QS = 10,000P. a. What is the equilibrium price and quantity under autarky? b. Imagine the Argentinian government decided to allow international trade. Before a tariff is imposed, what are the equilibrium price and domestic consumption in that scenario? c. Before a tariff is imposed, what are the domestic production and imports? d. The Argentinian government has decided to help the local mango industry by imposing a tariff of US$1 per unit. What are the new equilibrium price and domestic consumption? e. What are the new domestic production and imports after the tariff is imposed? How much money the government collects for the tariff? f. Present a figure of this case study and discuss about the effects of opening to international trade of mango and the effects of the tariffs, presenting the losses to Argentinian consumers, gains to Argentinian farmers and potential deadweight loss. Which other policy intervention alternatives might the Argentinian government have to help domestic producers
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