Consider the case of the following large country (all prices are measured in euros, and quantities are measured in single units): – Domestic demand curve: P = 3600 –3Q – Domestic supply curve: P = 2Q – World free trade price of imports = 140 euros per unit – When the tariff is introduced, domestic prices rise by exactly one third of the amount of the tariff. Calculate the following. Also show your workout. Draw a diagram depicting the importing country market under free trade and with
Consider the case of the following large country (all prices are measured in euros, and quantities are measured in single units):
– Domestic demand curve: P = 3600 –3Q
– Domestic supply curve: P = 2Q
– World free trade price of imports = 140 euros per unit
– When the tariff is introduced, domestic prices rise by exactly one third of the amount of the tariff.
Calculate the following. Also show your workout. Draw a diagram depicting the importing country market under free trade and with a tariff.
Under free trade equilibrium:
The quantity consumed domestically: ___________________________________________________
The quantity produced domestically: ___________________________________________________
The quantity imported: ______________________________________________________________
With a 30 euro specific tariff :
The equilibrium quantity consumed domestically: _________________________________________
The equilibrium quantity produced domestically: __________________________________________
The equilibrium quantity imported:
_____________________________________________________
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