3. Following Question 2, but suppose now a giant coffee distributor has acquired all the other distribution services and becomes a monopoly in coffee distribution within the US. The world production of coffee still faces the same marginal cost as before (i.e. $8 per pound before tariff). The distributor’s distribution cost remains $2 per pound. The US demand is still Q = 300 – 20P per year (Q is in the unit of millions of pound).
How much tariff revenue does the US government collect compared to the government in 2(b) and how much of the $2-per-pound tariff is transferred to consumers by price?
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