Question
In: Economics
The world consists of two countries: Home and Foreign. We observe supply and demand curves in...
The world consists of two countries: Home and Foreign. We observe supply and demand curves in both countries:
D= 50-25P and S=25P in Home
D* = 200-25P* and S* = 25P-50 in Foreign
a) Derive MD (import demand) and XS (export supply) curves.
b) Graph MD and XS. Find the world equilibrium (price and quantity) under free trade.
c) Suppose that importer imposes a tariff t = 2. Find the new prices in Home and Foreign. How will the volume of trade change?
d) Consider the importer country. Calculate the welfare effects from the tariff for consumers, producers, and government. Calculate efficiency losses and the terms of trade gains. What is the overall welfare effect?
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
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+ 200P.
a) What would the price of wheat be in case of no trade in Home?
b) What would the price of wheat be in case...
Given the following demand and supply curves for a product that is produced in two countries,...
Given the following demand and supply curves for a product that
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Foreign. The Home country imports the product from the Foreign
country.
The information for the Home country:
Quantity demanded is:
QD1=20-10p
Quantity supplied
is:
QS1=-5+20P
And the following information for the
Foreign country:
Quantity demanded is:
QD2=15-35P
Quantity supplied
is:
QS2=-20+5P
1. The home country imposes a specific import tariff of $13 per
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There are two countries, Home and Foreign. The two countries are identical except that Home has...
There are two
countries, Home and Foreign. The two countries are identical except
that Home has a labor force of 100 and Foreign has a labor force of
200. Given this allocation of labor across Home and Foreign, the
value of the marginal product of labor in Home is 30 and the value
of the marginal product of labor in Foreign is 20. If labor were to
be free to move, the wage in both countries would be25.
fi mmigration...
There are two countries, Home and Foreign. The two countries are identical except that Home has...
There are two countries, Home and Foreign. The two countries are
identical except that Home has a labor force of 100 and Foreign has
a labor force of 200. Given this allocation of labor across Home
and Foreign, the value of the marginal product of labor in Home is
30 and the value of the marginal product of labor in Foreign is 20.
If labor were to be free to move, the wage in both countries would
be 25.
What...
Consider a world with two countries, Home and Foreign, both able to produce two goods: cloth...
Consider a world with two countries, Home and Foreign, both able
to produce two goods: cloth and tablet computers. The production of
both goods uses
capital and labor in fixed proportions, with the tablets industry
using more capital per worker than the cloth industry. The units of
each input needed to produce one unit output are given by:
capital
Labor
Cloth
1
2
Tablets
2
1
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domestically, but also imports sugar from Foreign. Home’s supply of
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c. Suppose an import quota of 13,000 is imposed...
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Suppose that the world price for a good is 120 and the domestic demand-and-supply curves are...
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b. How much is domestic
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c. Calculate the values of
consumer and producer surplus.
d. If a tariff of 30% is imposed,
how much do consumption and domestic production change?
e. What is the...
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