Home's demand and supply for cars are given by: D = 130 - 30P and S = 10 + 30P, while Foreign's demand and supply for cars are: D = 60 - 30P and S = 40 + 30P (P is thousands of US$). Home has the ad valorem tariff of T = 0.4 per car in place. Now, the Foreign government decides to grant an ad valorem export subsidy of T = 0.4 per exported car. How does this subsidy affect Home welfare? Show graphically the changes to surpluses and tax revenues for Foreign.

Home's demand and supply for cars are given by: D = 130 - 30P and S = 10 + 30P, while Foreign's demand and supply for cars are: D = 60 - 30P and S = 40 + 30P (P is thousands of US$). Home has the ad valorem tariff of T = 0.4 per car in place. Now, the Foreign government decides to grant an ad valorem export subsidy of T = 0.4 per exported car. How does this subsidy affect Home welfare? Show graphically the changes to surpluses and tax revenues for Foreign.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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