- Asap 1 (29.95 KiB) Viewed 35 times
1. (13 points) A small country can import a good at a world price of 5 per unit. The domestic supply curve of the good is given by the following equation S= 10 + 5P. The demand curve is given by the following equation D= 400-5P In addition, each unit of production yields a marginal social benefit of 5. a. Calculate the total effect on welfare of a tariff of 10 per unit levied on imports. b. Calculate total effect on welfare of a production subsidy of 10 per unit. c. Explain briefly which method (tariff or production subsidy) you would use by considering the welfare effects. Provide the reasons for your answer. d. Determine the optimal level of the selected method for your answer in c.