The Domestic Market for Calculators Is Perfectly Competitive and Is

question 58

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^s = 4P. 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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Definitions:

Heavy Machineries

Large and heavy vehicles or equipment used for construction, industrial, or agricultural purposes.

Greenfield Operation

A project where a company builds its operations in a foreign country from the ground up, typically in an area where no previous facilities exist.

Exporting

The process of selling goods or services produced in one country to buyers in another country.

Master Franchise Arrangement

A type of franchise agreement where the master franchisee has the exclusive rights to develop a brand in a particular territory, sub-franchising to others.