Kiwi Inc. dominates the wholesale chicken market in New Zealand. Its production cost is: long-run average cost [LAC] = long-run marginal cost [LMC] = $2 per pound and demand is given by P = 6 - 2Q, where P denotes price per pound and Q denotes output (in millions of pounds).
(a) Determine Kiwi's output and price (presuming it faces no other competitors).
(b) Over the last five years, a Southeast Asian nation has dramatically increased its exports of chicken to New Zealand. That nation’s cost structure (with lower labor costs and higher shipping costs) is the same as Kiwi’s. Find the long-run output and price under perfect competition.
(c) New Zealand lawmakers have decided to enact a $1 per pound tariff on all chicken imports. What is the new equilibrium price? Suppose that imports fall to QI = .5 million pounds, what is Kiwi’s output? Compute consumer surplus and Kiwi’s profit. How has the tariff affected total welfare?

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The Answer of Kiwi Inc. dominates the wholesale chicken market in New Zealand. Its production cost is: long-run average cost [LAC] = long-run marginal cost [LMC] = $2 per pound and demand is given by P = 6 - 2Q, where P denotes price per pound and Q denotes output (in millions of pounds).
(a) Determine Kiwi's output and price (presuming it faces no other competitors).
(b) Over the last five years, a Southeast Asian nation has dramatically increased its exports of chicken to New Zealand. That nation’s cost structure (with lower labor costs and higher shipping costs) is the same as Kiwi’s. Find the long-run output and price under perfect competition.
(c) New Zealand lawmakers have decided to enact a $1 per pound tariff on all chicken imports. What is the new equilibrium price? Suppose that imports fall to QI = .5 million pounds, what is Kiwi’s output? Compute consumer surplus and Kiwi’s profit. How has the tariff affected total welfare?

Kiwi Inc Dominates the Wholesale Chicken Market in New Zealand