Suppose that in the domestic market for computer chips the demand is Pd = 110 - Qd. The domestic supply is Ps = 10 + Qs. Foreign suppliers would be willing to supply any number of chips at a price of 30$. The govt is contemplating three possible policies:
I) Ban import chips. II) The chips can be imported with no tari§s. III) The govt allows import, but imposes a tari§ of 10$ per unit.
Under each of the three policies determine the following:
i) How many units would be consumed domestically,
ii) How many units would be produced domestically,
iii) What is the size of the domestic producer surplus,
iv) What is the size of consumer surplus,
v) what is the size of govt receipts.