Question: Consider the case of a Foreign monopoly with no Home production, shown in Figure. Starting from free trade at point A, consider a $10 tariff applied by the Home government.
a. If the demand curve is linear, as in Problem, what is the shape of the marginal revenue curve?
b. How much does the tariff-inclusive Home price increase because of the tariff, and how much does the net-of-tariff price received by the Foreign firm fall?
c. Discuss the welfare effects of implementing the tariff. Use a graph to illustrate under what conditions, if any, there is an increase in Home welfare.
Problem: Suppose that the demand curve for a good is represented by the straight line P = 10 - Q
Fill in the missing information in the following chart:
a. Draw a graph containing both the demand curve and marginal revenue curve.
b. Is the marginal revenue curve a straight line as well? What is the slope of the marginal revenue curve? How does that slope compare with that of the demand curve?
c. Does the marginal revenue curve contain negative values over the specified range of quantities? Explain why or why not.
