Answer the next question(s) on the basis of the following
domestic supply and demand schedules for a product. Suppose
that the world price of the product is $1.
Quantity
Quantity
supplied
demanded
(domestic) Price (domestic)
12
$5
2
10
4
4
7
3
7
4
2
11
1
1
16
a) With free trade, that is, assuming no tariff, what would be the
outputs produced by domestic and foreign producers
respectively?
(1
mark)
b) With a $1 dollar per unit tariff, what will be price and
total quantity sold?
(1 mark)
c) With a $1 per unit tariff, what will be the quantities sold by
foreign and domestic producers respectively?
(1 mark)
d) With a $1 per unit tariff, what will be prices (revenue per unit)
received by domestic and foreign producers
respectively?
(1 mark)
e) What will be the total amount of revenue collected from a
$1 per unit tariff on this product?
(1 mark)
