Consider the demand and supply equations for Norway below.

Qd = 140 - 2P

Qs = 40 +3P After the country opens to trade, the world price is $8. Suppose this country imposes a tariff of $7. By how much does the producer surplus change relative to the trade with no tariff case? Does this small country lose or gain overall? Compute the net loss/gain.

Let's say there are two goods: scarfs and boots and below are the equations that govern their production. Assume that scarfs are labor intensive.

'w' and 'r' are wage rate and rental rate. The numbers are the amounts of labor and capital needed to produce a unit of scarf and boots. Price of scarf: 6w+5r Price of boots: 4w +6r

Suppose the price per unit of scarf and the price per unit of boots are initially $18. Compute the values for w and r. Calculate the labor cost of producing a unit of scarf.

Suppose that the production of a good is characterized by external economies of scale. Draw a neat diagram and explain the effect of trade in this good on domestic (exporting country) consumers and producers and producers in importing country.