Econ 201 – Domestic markets of smart phones

Subject: Economics    / General Economics
Question
IPFW Econ 201
Spring 2017
3) Below is the diagram for domestic markets of smart phones in Peru. 90
Suppose the government decides to allow free trade at the world price of $30.
a.
b.
c.
d. How many smart phones will be imported or exported at the world price of $30?
What is the resulting gain in domestic consumer surplus?
What is the resulting loss in domestic producer surplus?
What is the resulting gain or loss in total surplus? Now, let’s assume that the government of Peru imposes a $10 per unit tariff on smart
phones, increasing the world price to $40.
e. How many smart phones will be imported or exported at the world price of $40?
f. What is the resulting dead weight loss due to the tariff?
g. What is the tariff revenue to the government? !1