Page 11 of 22 Page 2 Question 11 (5 points) Suppose Home's demand and supply functions for wheat are D 100 - 20P and S - 20 + 20P and Foreign's demand and supply functions for wheat are D -80 - 20P and S* = 40 +20P A. Derive Home's import demand and Foreign's supply schedule and prices of wheat in absence of trade. (1 point) Page 3 ge 4: B. Now, Home and Foreign opens up to trade. Find the equilibrium under free trade. What is the world price wheat and what is the volume of trade? (1 point) C. Suppose Home imposes a specific tariff of 0.5 on wheat imports. Determine the effect of tariff on the price of wheat in each country, the quantity supplied and demanded in each country and the volume of trade. (1 points) D. Determine the effect of tariff on the welfare of Home consumers, Home government and Home import-competing producers. (1 points) E. Now suppose Foreign is a much larger country with domestic demand and supply D*=800-200P and S* = 400 + 200P Recalculate the free trade equilibrium and the effects of tariff a specific tariff of by Home. (1 point) MacBook Pro Page 11 of 22 Page 2 Question 11 (5 points) Suppose Home's demand and supply functions for wheat are D 100 - 20P and S - 20 + 20P and Foreign's demand and supply functions for wheat are D -80 - 20P and S* = 40 +20P A. Derive Home's import demand and Foreign's supply schedule and prices of wheat in absence of trade. (1 point) Page 3 ge 4: B. Now, Home and Foreign opens up to trade. Find the equilibrium under free trade. What is the world price wheat and what is the volume of trade? (1 point) C. Suppose Home imposes a specific tariff of 0.5 on wheat imports. Determine the effect of tariff on the price of wheat in each country, the quantity supplied and demanded in each country and the volume of trade. (1 points) D. Determine the effect of tariff on the welfare of Home consumers, Home government and Home import-competing producers. (1 points) E. Now suppose Foreign is a much larger country with domestic demand and supply D*=800-200P and S* = 400 + 200P Recalculate the free trade equilibrium and the effects of tariff a specific tariff of by Home. (1 point) MacBook Pro