Question

Suppose that Malaysia is a small open economy; hence, Malaysia is unable to influence world price. The supply and demand schedules for TV set are depicted in Table A.  Additionally, the equilibrium price and quantity for Malaysia's market for TV sets is $25 and 10, respectively.

Table A: Supply and Demand: TV Sets (Malaysia)

Price of TVS	Quantity Supply	Quantity Demanded
0	0	20
10	4	16
20	8	12
30	12	8
40	16	4
50	20	0

(a) Given this information, calculate the value of Malaysian consumer surplus and producer surplus.

(b) Under free-trade conditions, assume Malaysia imports TV sets at a price of $10 each.

(i) How many TV sets will be produced, consumed, and imported?

(ii) Calculate the dollar value of Malaysian consumer surplus and producer surplus?

(c) Suppose that free trade is hurting the domestic producers in Malaysia. To protect its producers from foreign competition, the Malaysian government levies a specific tariff of $10 on imported TV sets.

(i) Compute the value of the tariff's consumption, protective, redistributive, and revenue effects.

(ii) Calculate the amount of deadweight welfare imposed on the Malaysian economy by the specific tariff.

Answer 1

Below image is ps and cs when there was no imports

Below diagram is for free trade at import price $10

Below image is when government imposed tariff of 10$ to imports

*Its protective effect not protective consumption

Below image is the highlighted areas of the given effects of tariff

The area in Orange is the redistributive effect

The area in green is protective effect

The area in yellow is revenue effect

And the area in pink is consumption effect

And if you add both the areas of green and pink you'll get dead weight loss of welfare