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A small country can import a good at a world price of 10 per unit. The domestic supply curve of the good is Q = 50+ 5P The demand curve is Qd = 400-10P In addition, each unit of production yields a marginal social benefit of 10. a. The welfare gain from a tariff of $5 per unit levied on imports is $ (Round your answer to the nearest penny) b. The welfare gain from a production subsidy of $5 per unit $ c. Why does the production subsidy produce a greater gain in welfare than the tariff? (Round your answer to the nearest penny) O A. In addition to acting as a production subsidy, the tariff acts like a consumption tax that reduces the gain in welfare. OB. The production subsidy more directly addresses the externality. OC. The $5.00 production subsidy increases production more than the $5.00 tariff. OD. Both A and B O E. All of the above d. The optimal production subsidy is $ (Round your answer to the nearest penny.)

A small country can import a good at a world price of 10 per unit. The domestic supply curve of the good is Q = 50+ 5P The demand curve is Qd = 400-10P In addition, each unit of production yields a marginal social benefit of 10. a. The welfare gain from a tariff of $5 per unit levied on imports is $ (Round your answer to the nearest penny) b. The welfare gain from a production subsidy of $5 per unit $ c. Why does the production subsidy produce a greater gain in welfare than the tariff? (Round your answer to the nearest penny) O A. In addition to acting as a production subsidy, the tariff acts like a consumption tax that reduces the gain in welfare. OB. The production subsidy more directly addresses the externality. OC. The $5.00 production subsidy increases production more than the $5.00 tariff. OD. Both A and B O E. All of the above d. The optimal production subsidy is $ (Round your answer to the nearest penny.)

Principles of Microeconomics
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter9: Application: International Trade
Section: Chapter Questions
Problem 8PA
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A small country can import a good at a world price of 10 per unit. The domestic supply curve of the good is Qs = 50+ 5P The demand curve is Qd = 400-10P In addition, each unit of production yields a marginal social benefit of 10. a. The welfare gain from a tariff of $5 per unit levied on imports is $. (Round your answer to the nearest penny) b. The welfare gain from a production subsidy of $5 per unit $. (Round your answer to the nearest penny) c. Why does the production subsidy produce a greater gain in welfare than the tariff? O A. In addition to acting as a production subsidy, the tariff acts like a consumption tax that reduces the gain in welfare. OB. The production subsidy more directly addresses the externality. C. The $5.00 production subsidy increases production more than the $5.00 tariff. D. Both A and B O E. All of the above d. The optimal production subsidy is $ (Round your answer to the nearest penny.)
Transcribed Image Text:A small country can import a good at a world price of 10 per unit. The domestic supply curve of the good is Qs = 50+ 5P The demand curve is Qd = 400-10P In addition, each unit of production yields a marginal social benefit of 10. a. The welfare gain from a tariff of $5 per unit levied on imports is $. (Round your answer to the nearest penny) b. The welfare gain from a production subsidy of $5 per unit $. (Round your answer to the nearest penny) c. Why does the production subsidy produce a greater gain in welfare than the tariff? O A. In addition to acting as a production subsidy, the tariff acts like a consumption tax that reduces the gain in welfare. OB. The production subsidy more directly addresses the externality. C. The $5.00 production subsidy increases production more than the $5.00 tariff. D. Both A and B O E. All of the above d. The optimal production subsidy is $ (Round your answer to the nearest penny.)
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