2. Consider the following demand and supply functions for wine for Italy and Spain. D' 180 – 20P' DS 80 – 10PS s' -20 + 10P' -20 + 20PS a) Calulate (i) the equilibrium world price when both countries are OPEN to trade; (ii) quantity exported and imported by each country; (iii) The TOTAL welfare of the importing country.Give exact numbers. b) The importing country introduces a tariff of €2. Calculate (i) the new price in the importing country; (ii) the new free trade price; (iii) the Total welfare of the importing country; (iv) the effect on the welfare of the importing country in comparison with your previous answer. Give exact numbers.
2. Consider the following demand and supply functions for wine for Italy and Spain. D' 180 – 20P' DS 80 – 10PS s' -20 + 10P' -20 + 20PS a) Calulate (i) the equilibrium world price when both countries are OPEN to trade; (ii) quantity exported and imported by each country; (iii) The TOTAL welfare of the importing country.Give exact numbers. b) The importing country introduces a tariff of €2. Calculate (i) the new price in the importing country; (ii) the new free trade price; (iii) the Total welfare of the importing country; (iv) the effect on the welfare of the importing country in comparison with your previous answer. Give exact numbers.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter9: Application: International Trade
Section: Chapter Questions
Problem 5CQQ
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Part B.
Transcribed Image Text:2. Consider the following demand and supply functions for wine for Italy and Spain.
D'
180 – 20P'
DS
80 – 10PS
s'
-20 + 10P'
-20 + 20PS
a) Calulate (i) the equilibrium world price when both countries are OPEN to trade; (ii)
quantity exported and imported by each country; (iii) The TOTAL welfare of the
importing country.Give exact numbers.
b) The importing country introduces a tariff of €2. Calculate (i) the new price in the
importing country; (ii) the new free trade price; (iii) the Total welfare of the importing
country; (iv) the effect on the welfare of the importing country in comparison with
your previous answer. Give exact numbers.
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