international trade problem from economics

1. (20 marks) Australia, a M country, imports chocolates at the world price of $20 per box. The supply and demand curves for boxes of chocolates in Australia are given by: DA = 500 2P SA = 150 + 5F i. (4 marks) Assume that Australia engages in free trade. What is the equilibrium price and quantity of chocolate boxes consumed? How many boxes are produced domestically and how many are imported? ii. (4 marks) Domestic producers of chocolates lobby the Federal Government to impose an import quota of 105 boxes. Calculate the domestic price of chocolates. Calculate the ad voiorem rate ofthe equivalent tariff for this quota. iii. (12 marks) Now say that Australia is a |a_rg country. Assume that for every $1 increase in the domestic price of chocolates the world price falls by $0.10. Say that Australia imposes the tariff rate calculated in part (iii) on chocolate imports. a. (4 marks) Show that, in this case. the world price of a box of chocolates is 18.72. b. (2 marks) How many boxes of chocolate will be imported? c. (6 marks) Comparing your answers in parts iii} and (iii), are consumers, producers and the government in a large country better off or worse off than their counterparts in the small country? Prove and provide an explanation in words for the welfare differences in each case