Y7

Problem 1: Consider three hypothetical countries, Toluca Lake (7), Shepherd's Glen (S), and Brahms (B). You are the ruler of Brahms, and as such, you have to decide the trade policy in your country. Your domestic consumers have market demand P - 80 -Q and your domestic producers have market supply P = 40 + Q. Brahms is a small country, facing Pr = 18 and Ps = 15 from Toluca Lake and Shepherd's Glen, respectively. Consider the following scenarios. 1.1. Suppose Brahms is autarkic, but is considering opening up to trade. Brahm's import demand curve will be P = a - 8Q. What are a and B? 1.2. Suppose Brahms is autarkic, but is considering opening up to trade. Calculate Brahms' change in welfare if, instead, it opened to free trade. 1.3. Suppose Brahms is not autarkic, but has a 40% tariff on imports. Calculate Brahms' change in welfare if, instead, it traded freely with Toluca Lake. 1.4. Suppose Brahms is not autarkic, but has a 25% tariff on imports. Calculate Brahms' change in welfare if, insteadt it traded freely with Toluca Lake. 1.5. Suppose Brahms is not autarkic, but has a 25% tariff on imports. Calculate Brahms' change in welfare if, instead, it traded freely with Shepherd's Glen.Problem 1: Consider three hypothetical countries, Toluca Lake (7), Shepherd's Glen (S), and Brahms (B). You are the ruler of Brahms, and as such, you have to decide the trade policy in your country. Your domestic consumers have market demand P - 80 -Q and your domestic producers have market supply P = 40 + Q. Brahms is a small country, facing Pr = 18 and Ps = 15 from Toluca Lake and Shepherd's Glen, respectively. Consider the following scenarios. 1.1. Suppose Brahms is autarkic, but is considering opening up to trade. Brahm's import demand curve will be P = a - 8Q. What are a and B? 1.2. Suppose Brahms is autarkic, but is considering opening up to trade. Calculate Brahms' change in welfare if, instead, it opened to free trade. 1.3. Suppose Brahms is not autarkic, but has a 40% tariff on imports. Calculate Brahms' change in welfare if, instead, it traded freely with Toluca Lake. 1.4. Suppose Brahms is not autarkic, but has a 25% tariff on imports. Calculate Brahms' change in welfare if, insteadt it traded freely with Toluca Lake. 1.5. Suppose Brahms is not autarkic, but has a 25% tariff on imports. Calculate Brahms' change in welfare if, instead, it traded freely with Shepherd's Glen