Suppose we have a competitive market for a good with domestic demand and supply given by:
P = 310 - .05QD
P = 30 + .03QS
International supply is given by a constant competitive price of P1 = $90.
Calculate the producer surplus from parts a and b. Are producers better or worse off as a result of international trade? Explain why.
Suppose the domestic government imposes an import tariff equal to $20. What will be the domestic quantity demanded and supplied, and what will be the tariff revenue to the government?