Question
The demand and supply curve for computer games in a small open economy are given by: P=100-Q and P=Q, where Q denotes quantity and p
The demand and supply curve for computer games in a small open economy are given by: P=100-Q and P=Q, where Q denotes quantity and p is the market price.a. Calculate the equilibrium price and quantity. b. Calculate the consumer's surplus, the producer's surplus and total surplus.c. Assume that the world price is 40. Calculate the new local price. Calculate the local quantity demanded and supplied. Compare the new surplus with previous result (b).d. What will be the welfare effects of this country of a quota of 10 units (world price is still 40)? Compare it with the pervious result (c).e. Instead of quota, the government implements an import tariff of $5. Calculate the equilibrium, consumer, producer and society welfare.
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