1. Suppose that domestic demand and supply of computer in a small open economy(Wonderland) are given by;...
Question:
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)
a.What are the autarky price and the quantity produced?(10p)
b.What are the levels of domestic production, consumption, and imports if the world price is $300?(10p)
c.How would your answers in part (b) change if this country imposes a tariff of $50?(10P)
d.Calculate and show the welfare effects(producer gain, government revenue, production deadweight cost and consumption deadweight cost) of this tariff. (10p)
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.
What is the price? Calculate.(10p)