The Domestic Market for Calculators Is Perfectly Competitive and Is $Q ^ { d } = 100 - P$

question 44

Multiple Choice

The domestic market for calculators is perfectly competitive and is in equilibrium. Domestic demand is given by $Q ^ { d } = 100 - P$ and domestic supply is given by $Q ^ { * } = 4 P$ . The world price for calculators is $\$ 10$ . As an alternative to a tariff of $\$ 10$ per unit, the government considers an outright trade prohibition on calculators. Which is better for the domestic economy?

• A) The trade prohibition is better.
• B) The tariff is better.
• C) The trade prohibition is better for producers; the tariff is better for consumers.
• D) Both policies generate exactly the same surpluses.

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