1:55 7 5 of 7 plants. Part II: Short-answer problems 1. (21 points) Suppose that Home is a small country. The figure depicts Home's import demand curve for widgets (M): Price $65 $60 $55 $50 $45 $40 0 20 40 60 80 100 (a) Find the autarky (no trade) price of widgets in the Home country. (2 points) (b) Suppose that the world price of widgets is $40. Compute the quantity of widgets im- ported in the free-trade equilibrium. (2 points) Suppose that Home applies an import quota limiting the quantity imported to 60 units. (c) Calculate the quota rents. (4 points) (d) Calculate the net effect of the import quota on Home's welfare if the government orga- nizes an efficient auction to distribute the quota licenses. (5 points) and has a marginal cost curve given by: : Home Import Demand, M (e) Calculate the net effect of the import quota on Home's welfare if the quota licenses are allocated to local firms but subject to rent seeking activities (e.g. corruption, bribery, lobbying). (5 points) (f) What is the equivalent import tariff of this quota? (3 points) P = 200-20 Quantity imported 2. (25 points) Suppose that a domestic monopolist in a small country faces the following demand: MC =0+Q 5 (a) Compute the price charged by the domestic monopolist and the quantity supplied in autarky (without trade). (5 points) (b) Now suppose that trade occurs with a world price of $50. Calculate the price charged by the domestic monopolist, the quantity supplied by the domestic monopolist, and the quantity imported after trade. (5 points) (c) Now suppose that this country imposes a $10 tariff on imports. Calculate the price charged by the domestic monopolist, the quantity supplied by the domestic monopolist, and the quantity imported after the tariff. (5 points) coursehero.com