Suppose that the free trade price of a good is $12 and a 10% ad valorem tariff is put in place. Domestic production in a small country rises from 2000 units to 2300 units & domestic consumption falls from 2600 to 2500 units.
What is producer surplus after tariff?
What is consumer surplus after tariff?
What is society's dead-weight loss after the tariff?
How does an equivalent subsidy affect the market? what is the cost to the government of this subsidy? Which policy would consumers prefer?