examine the partial equilibrium welfare effects associated with imposing a tariff on their import good given that the prediction of the imported good yields a positive externality.Should a subsidy have given a more desirable solution.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section2.7: Decisions Involving The Time Value Of Money
Problem 16P
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Assume that Trinbago is a small country that produces wine and motor vehicles, where 
motor
vehicles are capital intensive. Trinbago is also capital intensive, and the standard Heckscher -
Ohlin
(H-O) assumptions hold. The other country in the model is Vincyland

 

Given that Vincyland is a small country, examine the partial equilibrium welfare effects
associated with imposing a tariff on their import good given that the prediction of the
imported good yields a positive externality.Should a subsidy have given a more
desirable solution. 

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