Suppose a country is large in the market for a particular good. There, the demand is...

Suppose a country is large in the market for a particular good. There, the demand is D = 9000 - 30P and the supply is S = -1000 + 10P. Moreover, when there is trade, this country is an importer, the import demand being MD = 10000 - 40P and the export supply being XS = -3000 + 60P.

1) In the absence of tariff, what is the total welfare in this country when there is trade?

2) What is the welfare change caused by a 50 dollar tariff?

3) What is the welfare change caused by a 175 dollar tariff?

4) What is the prohibitive tariff rate?

5) The optimal tariff is (Choose one):

a. Below 50 dollars.

b. Between 50 and 175 dollars.

c. Between 175 and 200 dollars.

d. Above 200 dollars.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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