Question
A. Consider a closed economy (an autarky). The equilibrium price of computers in this autarky is equal to $1,000. Suppose that the world price of
A. Consider a closed economy (an autarky). The equilibrium price of computers in this autarky is equal to $1,000. Suppose that the world price of computers is equal to $800. Does this country have a comparative advantage in producing computers? If this autarky opens up to international trade, will this country export or import computers?
B. Show the consumer surplus, producer surplus, equilibrium price, and quantity traded for the closed economy in part - A in the market for computers.
C. Now suppose this closed economy opens up to international trade. Now show the consumer surplus, producer surplus, equilibrium price, and quantity traded. Please show the exports/imports of the newly opened economy.
D. What happened to consumer surplus, producer surplus, equilibrium price, and quantity traded after this economy opened up to international trade?
E. Suppose the policymakers in the newly opened economy are concerned about the welfare of computer producers. Hence, they decide to impose a 30% tariff (a tax on imports) on imported computers. Show the price of computers in the newly opened economy after the tariff is imposed. Show the consumer surplus, producer surplus, equilibrium price, and quantity traded after the tariff is imposed. Also, please show the government's tariff revenue.
F. In this newly opened economy, who benefited from the tariff? The consumers, the producers, the government?
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