+1-415-670-9189
info@expertsmind.com
Calculate the total effect on welfare of a tariff
Course:- Econometrics
Reference No.:- EM131134870




Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Econometrics

Suppose that demand and supply are exactly as described in problem 3 but that there is no marginal social benefit to production. However, for political reasons the government counts a dollar's worth of gain to producers as being worth $3 of either consumer gain or government revenue. Calculate the effects on the government's objective of a tariff of 5 per unit.

Problem 3

A small country can import a good at a world price of 10 per unit. The domestic supply curve of the good is

S = 20 + 10P

The demand curve is

D = 400 - 5P

In addition, each unit of production yields a marginal social benefit of 10.

a. Calculate the total effect on welfare of a tariff of 5 per unit levied on imports.

b. Calculate the total effect of a production subsidy of 5 per unit.

c. Why does the production subsidy produce a greater gain in welfare than the tariff?

d. What would the optimal production subsidy be?




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Econometrics) Materials
How do neighborhood associations and homeowners' covenants control negative externalities and encourage (or require!) positive externalities? What are the advantages and dra
In the long-run equilibrium in an increasing-cost industry, each firm earns zero economic profits. Yet there is a positive area between the long-run industry supply curve an
Suppose the demand curve for a monopolist is QD = 500 - P and the marginal revenue function is MR = 500 - 2Q. The monopolist has a constant marginal and average total cost o
Consider the following demand schedule. Does it apply to a perfectly competitive firm Compute marginal and average revenue. Price Quantity Price Quantity Suppose the marginal
(Fed Tools of Monetary Control)What three tools can the Fed use to change the money supply? Which tool is used most frequently? What are three limitations on the money expan
Determine the possible circumstances under which the company should discontinue operations. Suggest key actions that management should take in order to confront these circumst
Assume that instead the market is monopolized and the monopolist's marginal cost function is 2+Q. Calculate the consumer and producer surplus. How much has the producer gain
How would the profit-maximizing choice of output change if the fixed cost increased from $40 to $60? More generally, explain how the level of fixed cost affects the choice o