Problem
For a particular product, Country A's supply and demand are represented by the following functions: Qs = 0 + P; Qd = 52 - P. Suppose Country A is a small country (it takes the world price as given) and the free-trade world price is $10.
Numerical answers are required for the questions.
i. If the government of Country A imposes a 100% tariff on the imports, how much does Country A import?
ii. Moving from free trade to the 100% tariff, by how much does the consumer's surplus change? (Positive number means a gain; a negative number means a loss)
iii. Moving from free trade to the 100% tariff, by how much does the producer's surplus change? (Positive number means a gain; a negative number means a loss)
iv. Moving from free trade to the 100% tariff, what is the deadweight loss for Country A caused by the tariff?