Q3 is a condition of Q4 4. Suppose demand and supply are...
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Q3 is a condition of Q4
4. Suppose demand and supply are exactly as described in problem 3 , but 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 $5 of either consumer gain or government revenue. Calculate the effects on the government's objective of a tariff of 10 per unit. 3. A small country can import a good at a world price of 5 per unit. The domestic supply curve of the good is S=10+10P The demand curve is D=6005P. In addition, each unit of production yields a marginal social benefit of 15 . a. Calculate the total effect on welfare of a tariff of 10 per unit levied on imports. b. Calculate the total effect of a production subsidy of 10 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
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