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A large country named H is considering an import tariff to protect the industry that produces good X. The world's excess supply curve is P=500+6X. Country H's excess demand curve is P=5000-30X.
a.) What is the equilibrium quantity and price of X prior to any tariff?
b.) What is the total worldwide economic surplus prior to any tariff?
Now suppose the country imposes a tax of 30% of the value the foreign producers receive from any imports into H.
c.) What is the equilibrium quantity sold after the tariff? (May be fractions of a unit.)
d.) What price do foreign producers receive for X sold to H? What price do H's consumers pay for X?
e.) What is the worldwide deadweight loss due to the tariff?
f.) What is the "unrecoverable consumer surplus" (as I called it in lecture) that is lost by H due to the tariff? What is the "Terms of Trade" gain for H due to the tariff? Yes or no, is this tariff better for H than no tariff?
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