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[3 points} [2 points} [5 points} Twocountry model with EXPORT QUOTA: use the functions above. As sume the importer does not impose an}:r tariff or

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[3 points} [2 points} [5 points} Twocountry model with EXPORT QUOTA: use the functions above. As sume the importer does not impose an}:r tariff or quota. a} Suppose the exporter imposes an export quota of 31} units. . Calculate Ir the new equilibrium world price. [which will also he the importer's domestic price.) I! The exporter's domestic prices Ir the quota price. h} Find the change in Social Surplus in each country relative to free trade. Give details on changes to CS and PS. Recall that quota rents need to be included in social surplus [1313: 55m: C5 + PS + RENTS] d} Find the exporter's optimal quota [to the nearest whole number). Show your work. QUOTAS DUE: Suppose we have the following demand and supply functions (taken from Assignment #2 and 3). HOME: Demand P= 100 - 1/2 Q Supply P = 1Q FOREIGN Demand P =200 - 2Q Supply P = 1/Q 1: Two-country model with IMPORT QUOTAS: use the functions above (1 point) a) Calculate the free trade world price and imports/exports for each country. Also find CS. PS, and SS for each country in free trade. (3 points) b) Suppose the IMPORTER imposes an import quota of 30 units. Calculate the new equilibrium world price. (which will also be the exporter's domestic price.) . The importer's domestic price the quota price. (difference between the domestic and world price) (2 points) c) Find the change in Social Surplus in each country relative to free trade. Give details on changes to CS and PS. Recall that quota rents need to be included in social surplus (EG: SSIMP = CS + PS + Rents). (4 points) d) Find the importer's optimal quota (to the nearest whole number). Show your work

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