Question
Would you please answer only question 2 with a graph? 1. Suppose that the free-trade price of a good is $12 and a 10 percent
Would you please answer only question 2 with a graph?
1. Suppose that the free-trade price of a good is $12 and a 10 percent ad valorem tariff is put in place. As a result, domestic production in a small country rises from 2,000 units to 2,300 units and imports fall from 600 units to 200 units. Who are the winners and losers? What is the size of their gains and losses? What is the net effect on society?
2. Using the example in Question 1, how does an equivalent subsidy to the import-competing producer affect the market? What is the cost to the government of this subsidy? Which policy would consumers prefer, the tariff or a subsidy?
I've already checked Chegg's and Course Hero's answers, which seem not to solve Q2.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started