Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Suppose we have the following demand and supply functions (taken from Assignment #2 and ]). HOME: Demand P = 100 - 4Q Supply P= 4Q

image text in transcribed
Suppose we have the following demand and supply functions (taken from Assignment #2 and ]). HOME: Demand P = 100 - 4Q Supply P= 4Q FOREIGN Demand P =200 -2 Q Supply P= WQ 1: Two-country model with IMPORT QUOTAS: use the functions above (1 point) a) Calculate the free trade world price and imports/exports for each country. Also find CS, PS, and SS for each country in free trade. (3 points) b) Suppose the IMPORTER imposes an import quota of 30 units. Calculate the new equilibrium world price. (which will also be the exporter's domestic price.) The importer's domestic price the quota price. (difference between the domestic and world price) (2 points) c) Find the change in Social Surplus in each country relative to free trade. Give details on changes to CS and PS. Recall that quota rents need to be included in social surplus (EG: SS = CS + PS + Rents). (4 points) d) Find the importer's optimal quota (to the nearest whole number). Show your work. 2: Two-country model with EXPORT QUOTA: use the functions above. Assume the importer does not impose any tariff or quota. (3 points) ) Suppose the exporter imposes an export quota of 30 units. . Calculate the new equilibrium world price. (which will also be the importer's domestic price.) The exporter's domestic prices the quota price. (2 points) b) Find the change in Social Surplus in each country relative to free trade. Give details on changes to CS and PS. Recall that quota rents need to be included in social surplus (EG: SSEXP = CS + PS + RENTS) (5 points) d) Find the exporter's optimal quota (to the nearest whole number). Show your work

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Marketing

Authors: Shane Hunt

3rd Edition

1260800458, 9781260800456

More Books

Students also viewed these Economics questions