6. Suppose Home is a small country and has a monopolist with Marginal cost 2q. The world priceis pw40. The Home inverse demand function isP = 150 - Q.(a) Find the Domestic Free Trade equilibrium outcome.P =(domestic) q =_Imports

Free trade is a mostly theoretical policy in which countries impose no customs , taxes , charges on…

6. Suppose Home is a small country and has a monopolist with Marginal cost 2q. The world price is p = 40. The Home inverse demand function is P = 150 - Q. (a) Find the Domestic Free Trade equilibrium outcome. P = (domestic) q =_ Imports -

6. Suppose Home is a small country and has a monopolist with Marginal cost 2q. The world price is p = 40. The Home inverse demand function is P = 150 - Q. (a) Find the Domestic Free Trade equilibrium outcome. P = (domestic) q =_ Imports -

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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(a) Draw an offer curve for Guatemala that shows its offer of coffee for wheat. Include both an elastic and inelastic range in Guatemala’s offer curve. (b) Draw an offer curve for the United States that shows its offer of wheat for coffee. Show this US curve intersecting the Guatemalan offer curve in the inelastic range of the Guatemalan curve. Note the equilibrium terms of trade established. (c) Compare the equilibrium international price you found in question (b) to the autarky prices in Guatemala and in the United States. (You can find a country’s autarky price by drawing a line tangent to the offer curve at the origin.) Explain which country benefits the most from a more favorable movement in its terms of trade when it abandons its autarky position. (d) “The Guatemalan offer curve is likely to be less elastic than the US offer curve.” Justify this claim by explaining what factors determine the elasticity of an offer curve.
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Lesson 12 Question 1
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