Consider a small country. The domestic (home) demand is Qd = 120−3P and supply is Qs = 2P −20 where Qs and Qd are the quantity supplied and demanded, respectively, and P is the price per unit. A) Find the equilibrium price and quantity when the domestic market is closed to international trade. Now, suppose the country opens up to international trade, and the world price is $20 per unit. B) Find the new equilibrium price, domestic quantity supplied and demanded, and quantity imported. C) Suppose the domestic government imposes a tariff of $4 per unit. Find the equilibrium price, domestic quantity supplied and demanded, quantity imported, and tax revenue collected. D) Now, suppose the government impose a quota that limits the quantity of imports to 20 units. Find the new equilibrium price, domestic quantity supplied and demanded, and quantity imported. E) Calculate Consumer surplus, producer surplus, and total surplus, with free trade F) Calculate Consumer surplus, producer surplus, tax revenue, total surplus, and deadweight loss with trade and the tariff in place. G) How would the deadweight loss and total surplus differ with trade and a quota in place, be specific.
Consider a small country. The domestic (home) demand is Qd = 120−3P and supply is Qs = 2P −20 where
Qs and Qd are the quantity supplied and demanded, respectively, and P is the
A) Find the
Now, suppose the country opens up to international trade, and the world price is $20 per unit.
B) Find the new equilibrium price, domestic quantity supplied and demanded, and quantity imported.
C) Suppose the domestic government imposes a tariff of $4 per unit. Find the equilibrium price, domestic
quantity supplied and demanded, quantity imported, and tax revenue collected.
D) Now, suppose the government impose a quota that limits the quantity of imports to 20 units. Find the
new equilibrium price, domestic quantity supplied and demanded, and quantity imported.
E) Calculate
F) Calculate Consumer surplus, producer surplus, tax revenue, total surplus, and
trade and the tariff in place.
G) How would the deadweight loss and total surplus differ with trade and a quota in place, be specific.
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