Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

(i) Imagine a market with demand and supply as follows: D: p=10-q and S: p=q. Find the equilibrium price and quantity (ii) Find the producer

(i) Imagine a market with demand and supply as follows: D: p=10-q and S: p=q. Find the equilibrium price and quantity 

(ii) Find the producer and consumer surplus and total welfare 

(iii) Now suppose there is a world price of $1 for the good. Which party (consumers or producers) would refuse to transact at the autarky price? 

(iv) Describe the new equilibrium in terms of I. Consumer and producer surplus and welfare II. Imports

SOLVE FROM HERE 

(v) Now suppose a $1 tariff is introduced, making the local price $2. You may assume for now the imposition of a tariff does not change the world price. Compare welfare (including the government tariff revenue) I. With the situation before the tariff II. With the situation in autarky 

(vi) Suppose this country is the only country in the world that demands this good. Derive a world demand for the good over the range from Price = 0 to Price = autarky Price. (hint: The world demand is the demand for imports to this country.) 

(vii) Go back to the situation before the tariff was introduced. Now suppose the world supply curve is pworld = qworld/8. Draw the world market for this good (viii) What is the equilibrium world price? 

(ix) What is the impact on world demand of a levying of a tariff of 1? (x) Redo your welfare analysis in part (v). Is this tariff optimal?

Step by Step Solution

3.60 Rating (168 Votes )

There are 3 Steps involved in it

Step: 1

i The equilibrium price and quantity can be found by solving the demand and supply equations simultaneously Demand p 10 q Supply p q Solving for p and q p 10 q q 10 q Substituting q 10 q into p 10 q p ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Econometric Analysis

Authors: William H. Greene

5th Edition

130661899, 978-0130661890

More Books

Students also viewed these Economics questions

Question

19. What does fMRI measurepg109

Answered: 1 week ago