2. Consider the country ABC. The demand function for product A is Q=500-4P, the supply function Q=100+4P.a) Draw the demand and supply curves. Find the equilibrium price and quantity for this market.b) If there is a price restriction of maximum $100 per unit of product A, what will be the equilibrium price andquantity for this market. What is the size of the shortage?c) The world price is $100. Should this country trade internationally? What will be the value of export/import? Findthe quantity of consumption and production, the domestic price, the consumer surplus and producer surplusbefore and after the trade. Compare the total surplus.d) Now suppose that the world price has decreased to $75. Should this country still trade? What will be the valueof export/import? Find the quantity of consumption and production, the domestic price, the consumer surplusand producer surplus before and after the world price change.e) Now suppose the government imposes a tax on producers of $30, so new supply function is Q=100+4(P-30).What is the size of the shortage/surplus, the deadweight loss, the tax revenue, the price, the quantity suppliedand demanded? Will the international trade change because of tax? What will be the value of export/import?

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2. Consider the country ABC. The demand function for product A is Q=500-4P, the supply function Q=100+4P. a) Draw the demand and supply curves. Find the equilibrium price and quantity for this market. b) If there is a price restriction of maximum $100 per unit of product A, what will be the equilibrium price and quantity for this market. What is the size of the shortage? c) The world price is $100. Should this country trade internationally? What will be the value of export/import? Find the quantity of consumption and production, the domestic price, the consumer surplus and producer surplus before and after the trade. Compare the total surplus.

2. Consider the country ABC. The demand function for product A is Q=500-4P, the supply function Q=100+4P. a) Draw the demand and supply curves. Find the equilibrium price and quantity for this market. b) If there is a price restriction of maximum $100 per unit of product A, what will be the equilibrium price and quantity for this market. What is the size of the shortage? c) The world price is $100. Should this country trade internationally? What will be the value of export/import? Find the quantity of consumption and production, the domestic price, the consumer surplus and producer surplus before and after the trade. Compare the total surplus.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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