Consider a world consisting of two countries, Ghana and Canada. Suppose the domestic demand and-supply curves for bicycle in Ghana are given by the following equations:

Demand: P = 80 - 2Q

Supply: P =5 + 3Q

(a) Assume that the price of bicycles in Canada is 20% less than that of Ghana. If free trade according to comparative advantage were allowed, what will be the price of bicycles in Ghana? How much of bicycles would be produced in Ghana? How much will be consumed in Ghana? And how much will be imported from Canada?

(b) Now assume that due to technical advancement in Canada the price of bicycle fall by 25%. If free trade according to comparative advantage were allowed, what will be the price of bicycles in Ghana? How much of bicycles would be produced in Ghana? How much will be consumed in Ghana? And how much will be imported from Canada?

(c) Based on part (b) what are the values of consumer and producer surplus in Ghana?

(d) If a tariff of 20 percent is imposed on imports from Canada, by how much do consumption and domestic production change? How much revenue does the government earn from the tariff?

(e) If instead of the tariff in (d), a quota of 10 bicycles is imposed, what will be the domestic price of bicycles? What will be the domestic demand and supply of bicycles?

(f) Assume demand for bicycles in Ghana increase to P = 90 - 2Q, show how it will impact on the results in part (d) and (e). Please draw the necessary graphs and show all calculations.

(g) Several years after, Ghana enacted a law stating that imports from Canada should be reduced to zero. What will be the domestic price of bicycles? What is the net national welfare cost/benefit of this policy using (iv) as the reference point?