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Assume that American s can buy any number of sugar




Assume that American s can buy any number of sugar from aboard at price of Px. If there were no foreign market, the domestic price of sugar (where the US supply curve crosses the US demand curve) would equal P1 which lies above the world price of Px. The government is considering two alternative policies to help domestic sugar producers. Under policy one, the government would impose a tariff (assume that there are still some imports after the tariff). Under policy two, the government would provide a per-unit subsidy to domestic producer. Suppose the amount of subsidy is selected so as to increase domestic production by the same amount that would occur under the tariff policy.;a.Find the change in consumer surplus and producer surplus under each policy.;b.Find the change in government costs under the subsidy policy. Find the change in government revenue under the tariff policy;c.Find and compare the deadweight loss (if any) of each policy.;Draw the graph first


Paper#25785 | Written in 18-Jul-2015

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