A small country can import a good at a world price of 10 per unit. The domestic supply curve of the good is                                                 The demand curve is...

A small country can import a good at a world price of 10 per unit. The domestic supply curve of the good is

The demand curve is

In addition, each unit of production yields a marginal social benefit of 10.

a. Calculate the total effect on welfare of a tariff of 5 per unit levied on imports.

b. Calculate the total effect of a production subsidy of 5 per unit.

c. Why does the production subsidy produce a greater gain in welfare than the tariff?

d. What would the optimal production subsidy be?