Study Guide for Microeconomics
9th Edition
ISBN: 9780134741123
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Question
Chapter 9, Problem 8E
(a)
To determine
Identify the domestic price of metal after imposing tariff.
(b)
To determine
Identify the domestic price of metal after the elimination of tariff.
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The market for rice in an East Asian country has demand and supply given by QD = 28 – 4P and QS = -12 + 6P, where quantities denote millions of bushels per day. a. If the domestic market is perfectly competitive, find the equilibrium price and quantity of rice. Compute the triangular areas of consumer surplus and producer surplus. b. Now suppose that there are no trade barriers and the world price of rice is $3. Confirm that the country will import rice. Find QD, QS, and the level of imports, QD – QS. Show that the country is better off than in part (a), by again computing consumer surplus and producer surplus. c. The government authority believes strongly in
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Country C imports 80,000 metric tons of steel from Country U and produces domestically 80,000 metric tons per year. The world price of steel is $500 per metric ton. Assuming linear schedules, research analysts estimated the price elasticity of domestic supply to be 0.50 and the price elasticity of domestic demand to be -0.25 in the current market equilibrium. Country C imposes an import duty of $150 per metric ton that caused the world price to fall by 10%.
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Chapter 9 Solutions
Study Guide for Microeconomics
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