Canada and the US trade tomatoes. The Canadian domestic demand (QdC ) and

supply curves (QsC) are:

The US domestic demand (QdU ) and supply curves (QsU) are:

=8008 1

=25+40 1

=2004 2

=45+30 2

Introduce a 20% ad valorem tariff in Canada. Calculate the new equilibrium

prices, quantities consumed, produced and traded.

f. Introduce a $7 per unit export subsidy in the US. Calculate the new equilibrium

prices, quantities consumed, produced and traded.

g. Introduce a $5 per unit producer subsidy in the US. Calculate the new

equilibrium prices, quantities consumed, produced and traded.

h. Introduce a $5 per unit consumer subsidy in the Canada. Calculate the new

equilibrium prices, quantities consumed, produced and traded.

i. In all the questions above we assumed that both countries had the same currency.

Now suppose that the Canadian currently appreciates by 20%. (Hint: P1=0.8*P2). Calculate the new equilibrium prices, quantities consumed, produced and traded.