The domestic market for calculators is perfectly competitive and is in equilibrium. Domestic demand is given by Qd=100−PQd=100−P and domestic supply is given by Qs=4PQs=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.
