Consider the pharmaceutical market in the US. The demand is Q = 200 - 2P Q P while supply is 2 40s Q P. Thefree trade price is 25. A) Calculate consumer surplus, producer surplus, total surplus, and imports under free trade.Illustrate all of these on a fully labelled graph. B) Suppose that the US puts a tariff of 6 on pharmaceuticals. When it doesthis, the free trade prices falls to 24. Calculate consumer surplus, producer surplus, tariff revenues, total surplus anddeadweight loss under the tariff. Illustrate all of these on a fully labelled graph. C) Is the country better off under the tariffor free trade? How do you know?

The objective of this question is to analyze the impact of free trade and tariffs on the…

Answered: Consider the pharmaceutical market in…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Country A has a competitive domestic market of charcoal. The demand and supply of the domestic market are given by QD = 12– 3P QS = P Country A has access to the international market, in which the charcoal price is Pw = 1. The domestic market is small and cannot influence the international price. a) What will be the price at which charcoal is traded in the domestic market? What will be the quantity produced in country A and what quantity will be exported/imported? b)Calculate the producer surplus and consumer surplus in country A and illustrate them in a demand and supply graph. c) Suppose charcoal’s price increases to PW=4 in the international market. What are the quantity demanded and the quantity produced in country A? What quantity does country A export/import? d) How does the price increase (from Pw =1 to Pw =4) change the consumer surplus and producer surplus in country A? Explain the changes in no more than 2 sentences. e) When Pw =4, the government in country A decides to…
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