Question
let Home supply and demand be given by D^Home(p)=300-p S^Home(p)=2p-30 Home Home Here price is in $ per unit. Let Rest-of-World supply be given by
let Home supply and demand be given by D^Home(p)=300-p S^Home(p)=2p-30 Home Home Here price is in $ per unit. Let Rest-of-World supply be given by 140=p^RoW i) (6 points) Find the Home country autarky price and quantity (3 points). Find the Home country level of exports under open trade (3 points). The Home country provides a subsidy of 10 per unit good exported. ii) (15 points) Under this program, provide a clearly and comprehensively labeled graph of world market supply and demand that includes a representation of the subsidy (hint, see class notes) (3 points). Calculate the levels of a) domestic production (3 points), b) domestic consumption (3 points), c) domestic price (3 points), d) subsidy program cost (3 points). iii) (4 points) Calculate change in Home country producer surplus relative to the open trade free market.
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