3. (25 marks) Suppose in a domestic market of a certain product with perfect competition, the domestic market demand curve is Qd = 10 -0.5P, and the domestic market supply curve is (-2+P, if P≥2 Qs = 10, Please use graph(s) to answer the questions below. if P < 2 (1) Suppose the government allows free trade in the domestic market, and the world price (Pw) is at $3. What are the consumer surplus and producer surplus? (2) Suppose now the government wants to protect domestic producers and placed a $2 tariff on every unit of product imported. What are the consumer surplus, producer surplus, revenues received from the tariff by the government, and the deadweight loss compared to the free trade scenario?
3. (25 marks) Suppose in a domestic market of a certain product with perfect competition, the domestic market demand curve is Qd = 10 -0.5P, and the domestic market supply curve is (-2+P, if P≥2 Qs = 10, Please use graph(s) to answer the questions below. if P < 2 (1) Suppose the government allows free trade in the domestic market, and the world price (Pw) is at $3. What are the consumer surplus and producer surplus? (2) Suppose now the government wants to protect domestic producers and placed a $2 tariff on every unit of product imported. What are the consumer surplus, producer surplus, revenues received from the tariff by the government, and the deadweight loss compared to the free trade scenario?
Chapter11: Resource Market
Section: Chapter Questions
Problem 2.4P
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