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The copper mines in country A have a constant marginal cost of $2 per lb of copper and their total daily capacity is 2000 lbs.
The copper mines in country A have a constant marginal cost of $2 per lb of copper and their total daily capacity is 2000 lbs. Country B's copper mines have a constant marginal cost of $3 per lb of copper and their total daily capacity is 800 lbs. All of these copper is exported to country B. (Country A does not need copper.) Country B's daily demand curve for copper is QD = 2500-500P. Currently, the government of B imposes no tax based on international trade agreement. a) What are the free-market equilibrium price and quantity? Illustrate how you get that through the demand and supply curves. b) new president is elected in country B, who believes in "Country B first" and as a result will impose a high tariff for importing copper from country A at $2.50 per lb. What are the equilibrium price and quantity under the tariff? Illustrate how you get that through a new graph of the demand and supply curves. c) How does the consumer surplus in Country B change? Are consumers in country B better off, worse off or the same? Explain d) How does the producer surplus in Country B change? Are producers in country B better off, worse off or the same? Explain. e) What are the tariff revenue for Country B? Is Country B better off or worse off in total?
