Calculate the international supply and consumer surplus

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Suppose we have a competitive market for a good with domestic demand and supply given by:

P = 310 - .05QD

P = 30 + .03QS

International supply is given by a constant competitive price of P1 = $90.

Calculate the producer surplus from parts a and b. Are producers better or worse off as a result of international trade? Explain why.

Suppose the domestic government imposes an import tariff equal to $20. What will be the domestic quantity demanded and supplied, and what will be the tariff revenue to the government?

Reference no: EM1312824


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