What would be a tariff-equivalent quantitative restriction

Reference no: EM13219040

In a small country, there is a single firm producing good X. The local demand curve is given by P=100-Q. The firm's marginal cost curve is MC=2Q. The world price of good X is Pw=30.

a) In free trade, what will be the domestic production of good X, how many units will be consumed and how many units will be imported?

b) Suppose the government introduces a tariff t=10. Find new domestic production and consumption of the good. How many units will the country import?

c) What would be a tariff-equivalent quantitative restriction?

d) If a tariff-equivalent quota was used, would the resulting domestic price be higher, lower, or the same as under the tariff, why?

e) Will the monopolist profits be higher under a tariff or under a tariff-equivalent quota? Explain.

Reference no: EM13219040

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