Question
Please help me on this question: A small country produces and consumes computer monitors with supply Qs = -50 + 3P and demand Qd =
Please help me on this question:
A small country produces and consumes computer monitors with supply Qs = -50 + 3P and
demand Qd = 500 - 2P. Quantities are in millions of units.
a. What are price and quantity produced and consumed under autarky?
b. If the world price is $80, what are domestic production and consumption and imports
under free trade?
c. If the government imposes a $20 tariff, what are the domestic price, production,
consumption, and imports?
d. Under this tariff, what are the changes from free trade in consumer and producer surplus,
tariff revenues, and total welfare (all these are expressed in dollars)?
e. If each domestic worker in this industry can produce 600 units per year, how many
domestic jobs are created by the tariff?
f. How much surplus do consumers lose for each domestic job created by the tariff?
g. How much total welfare is lost for each job created by the tariff?
h. If a quota is substituted for the tariff, what size quota will leave prices unchanged from
what they would be with the tariff?
i. Draw a diagram and label all prices, quantities, tariff revenue, and changes in surpluses.
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