The supply of wheat in a small open economy is given by S= -100+10p and its imports demand function is given by M= 900-15p, where p is the price, S is the quantity supplied and M is the amount of imports. Calculate the equilibrium price and quantities of wheat produced and consumed in autarky. Suppose the country enters free trade and that the world price is pF = 30 euros. Calculate the new quantities produced and consumed in the country. Following complains by local producers that free trade imports hurt domestic production, the country’s government decides on the imposition of an import tariff t=15 euros per unit of imports. Calculate the after-tariff quantities produced and consumed in the country as well as the change in the country’s aggregate welfare, relative to free trade. Briefly comment on your answer.
The supply of wheat in a small open economy is given by S= -100+10p and its imports
Calculate the
Suppose the country enters free trade and that the world price is pF = 30 euros. Calculate the new quantities produced and consumed in the country.
Following complains by local producers that free trade imports hurt domestic production, the country’s government decides on the imposition of an import tariff t=15 euros per unit of imports. Calculate the after-tariff quantities produced and consumed in the country as well as the change in the country’s aggregate welfare, relative to free trade. Briefly comment on your answer.
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