Question
Suppose that the market for strawberries in the U.S. consists of two regions: Florida and Washington. The supply and demand in Washington is: Q sw
Suppose that the market for strawberries in the U.S. consists of two regions: Florida and Washington. The supply and demand in Washington is: Q sw = 4P w Q dw = 200 - 2P w The supply and demand in the Florida region is: Q sf = 30 + 4P f Q df = 200 - 4P f A. How large would transfer costs have to be to prohibit any trade from occurring? B. Suppose transfer costs between regions was $6 per unit. What would the equilibrium price in Florida and Washington be, and what would be the amount of imports/exports to/from each region? C. How much of the $6 transfer cost is paid by Florida exporters and how much is paid by Washington importers?
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