1. The domestic demand (QD) and supply (Qs) for strawberries in Canada are given respectively by QD = 800 – 25P where P is the price per box of strawberries. and Qs = -40 + 5P %3D a) What would be the equilibrium price and quantity if Canada could not trade with any other country for strawberries? b) Calculate producer surplus, consumer surplus and total surplus in the autarky situation (no trade) for strawberries in Canada? c) Canada is a “small" country in the global market for strawberries since its production or consumption levels do not affect world price. The world price for strawberries is $20 per box. How much will Canada consume? How much will it produce domestically and how much will it import (or export)?
1. The domestic demand (QD) and supply (Qs) for strawberries in Canada are given respectively by QD = 800 – 25P where P is the price per box of strawberries. and Qs = -40 + 5P %3D a) What would be the equilibrium price and quantity if Canada could not trade with any other country for strawberries? b) Calculate producer surplus, consumer surplus and total surplus in the autarky situation (no trade) for strawberries in Canada? c) Canada is a “small" country in the global market for strawberries since its production or consumption levels do not affect world price. The world price for strawberries is $20 per box. How much will Canada consume? How much will it produce domestically and how much will it import (or export)?
Chapter17: International Trade
Section: Chapter Questions
Problem 2.5P
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![1. The domestic demand (QD) and supply (Qs) for strawberries in Canada are given
respectively by
QD = 800 – 25P
where P is the price per box of strawberries.
and Qs = -40 + 5P
a) What would be the equilibrium price and quantity if Canada could not trade with
any other country for strawberries?
b) Calculate producer surplus, consumer surplus and total surplus in the autarky
situation (no trade) for strawberries in Canada?
c) Canada is a “small" country in the global market for strawberries since its
production or consumption levels do not affect world price. The world price for
strawberries is $20 per box. How much will Canada consume? How much will it
produce domestically and how much will it import (or export)?
d) If trade is allowed so that the market price for strawberries is $20/box, calculate
producer surplus, consumer surplus and total surplus for strawberries in
Canada?
e) Calculate the net change in consumer surplus, producer surplus and total welfare
by allowing free trade.
f) The imports of strawberries into Canada are from the United States. In response
to tariffs being imposed on Canadian steel by the United States, Canada decides
to impose an import quota of 150 boxes. What will be the new price of
strawberries in Canada? (Hint use the excess demand equation and equate it to
150).
g) Use a properly labeled diagram to illustrate the winners and losers from the
imposition of an import quota of 150 boxes by Canada.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Ffe6663af-1415-44ef-9372-b4845b3d8b04%2Fb284d803-cfa0-4c31-91fd-4315eb8cdc75%2Frc0u9sf_processed.png&w=3840&q=75)
Transcribed Image Text:1. The domestic demand (QD) and supply (Qs) for strawberries in Canada are given
respectively by
QD = 800 – 25P
where P is the price per box of strawberries.
and Qs = -40 + 5P
a) What would be the equilibrium price and quantity if Canada could not trade with
any other country for strawberries?
b) Calculate producer surplus, consumer surplus and total surplus in the autarky
situation (no trade) for strawberries in Canada?
c) Canada is a “small" country in the global market for strawberries since its
production or consumption levels do not affect world price. The world price for
strawberries is $20 per box. How much will Canada consume? How much will it
produce domestically and how much will it import (or export)?
d) If trade is allowed so that the market price for strawberries is $20/box, calculate
producer surplus, consumer surplus and total surplus for strawberries in
Canada?
e) Calculate the net change in consumer surplus, producer surplus and total welfare
by allowing free trade.
f) The imports of strawberries into Canada are from the United States. In response
to tariffs being imposed on Canadian steel by the United States, Canada decides
to impose an import quota of 150 boxes. What will be the new price of
strawberries in Canada? (Hint use the excess demand equation and equate it to
150).
g) Use a properly labeled diagram to illustrate the winners and losers from the
imposition of an import quota of 150 boxes by Canada.
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