1.Suppose that domestic demand and supply of computer in a small open economy(Wonderland) are given by;

P=800-2Q (demand)

P=200+Q (supply)

(Answer the questions below by using graph)

Consider instead of tariff, a per unit production subsidy of $50 paid by government to domestic producers.

e.What is the economic cost of subsidy program? (10p)

f.What is the price of computer? What is the quantity of import?(10p)

Consider instead of tariff, government imposes 120 units of quota on import.

g.What is the price? Calculate.(10p)