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A small country can import a good at a world price of 10 per unit. The domestic supplycurve of the good is S = 20 + 10P , D = 400 – 5P.In addition, each unit of production yields a marginal social benefit of 10.Now, suppose demand and supply are exactly as described in problem 3, but there is nomarginal social benefit to production. Ho

by | Sep 8, 2023 | economics

3. A small country can import a good at a world price of 10 per unit. The domestic supplycurve of the good is S = 20 + 10P , D = 400 – 5P.In addition, each unit of production yields a marginal social benefit of 10.Now, suppose demand and supply are exactly as described in problem 3, but there is nomarginal social benefit to production. However, for political reasons the government counts adollar’s worth of gain to producers as being worth $3 of either consumer gain or governmentrevenue. Calculate the effects on the government’s objective of a tariff of 5 per unit
  

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