Questions 1 and 2 refer to a big home country exporting good Q to ROW (Rest OF the World). The export supply and import demand for good Q are as follows: XS = P MD = 100 P Where XS, MD, and P are respectively export supply, import demand, and price Under free trade a. The equilibrium Q and Pare respectively. and o. The welfare gains from free trade of the Home country and ROW are respectively. and Suppose the Home country gives a subsidy of $20 per unit of exports. With the subsidy a. The equilibrium Q and Pare and respectively. o. In comparison with free trade, the changes in home government expenditure, in ROW's welfare, in exporters' welfare, in Home welfare, and in world welfare are respectively. and
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- Home's demand curve for wheat isD = 100- 20P.Its supply curve isS= 20 + 20P.Derive and graph Home's import demand schedule. What would the price of wheat be in the absence of trade?2. Now add Foreign, which has a demand curve*D=80-20pand a supply curve = 40 + 20P.Derive and graph Foreign's export supply curve and find the price of wheat that would prevail in Foreign in the absence of trade.b. Now allow Foreign and Home to trade with each other, at zero transportation cost.Find and graph the equilibrium under free trade. What is the world price? What isthe volume of trade? 3. Home imposes a specie tariff of 0.5 on wheat imports.a. Determine and graph the effects of the tariff on the following: (1) the price ofwheat in each country; (2) the quantity of wheat supplied and demanded in each country; (3) the volume of trade.b. Determine the effect of the tariff on the welfare of each of the following groups:(1) Home import-competing producers; (2) Home consumers; (3) the Homegovernment.c.…The diagram below shows supply and demand curves for the same good in two countries, A and B. Based on the prices and areas labeled there, Country B P Country A P P3 d P a P D D O The autarky price in Country A is P2. O Country B has a comparative advantage in this good. Moving from autarky to free trade makes suppliers in Country A worse off by the amount a+b. O Moving from autarky to free trade makes demanders in Country B better off by the amount c+d.Consider two countries, home and foreign and a single good, Y. Assume that home country imports good Y fromforeign country. The import demand curve for good Y in home country is given by: MD = 170 – 2PY and theexport supply curve for good Y in Foreign country is given by: EX = PY – 40.Part A. What is the free trade price of good Y? Show your work. Part B. How many units of good Y are traded under free trade? Show your work. Part C. If home country imposes a specific tariff of $15 per unit of good Y imported, what is the price of goodY that Foreign exporters receive? Show your work. Part D. If home country imposes a specific tariff of $15 per unit of good Y imported, what is the price of goodY that Home consumers pay? Show your work. Part E. If home country imposes a specific tariff of $15 per unit of good Y imported, how many units of goodY are traded now? Show your work. Part F. If home country imposes a specific tariff of $15 per unit of good Y imported, what is the tariffrevenue?…
- D Question 6 As part of a trade war, country A agrees to introduces a quota on cars imported from country B. Country A can then expect the price of cars imported from country B to decrease, and their quality to remain the same O the price and the quality of cars imported from country B to increase the price of cars imported from country B to increase, and their quality to decrease O the price and the quality of cars imported from country B to decreaseThe figure below shows the hypothetical domestic supply and demand for baseball caps in the country of Spain. Domestic Supply and Demand for Baseball Caps Spain Price (€ per cap) 10 X 10 20 30 40 50 60 70 80 90 100 9 8 7 5 3 2 1 0 Sd Ddcopared with the Tariff, would belgium's welfare be different if it set a quota ( that had the same level of imports as under the tariff) and auctioned the quota rihts to the highest bidder? tell whether wellfare is hight, lower or the same, then explain why
- 3. The world price of sugar is $.10 per lb., but import quotas raise the U.S. price to $.225 per lb. a. Compute the tariff equivalent of the quota (as a percent of the world price). b. Due to the high price of sugar in the U.S., high fructose corn sweetener emerges as an economic substitute for sugar. As a result it is expected that the demand for sugar will fall over time. From the perspective of the U.S. sugar industry, are they better off with tariff protection, or a quota which is equivalent today, but which stays fixed over time? Explain using a supply and demand diagram in your answer.Assume the United States is an importer of televisionsand there are no trade restrictions. U.S. consumersbuy 1 million televisions per year, of which 400,000 areproduced domestically and 600,000 are imported.a. Suppose that a technological advance amongJapanese television manufacturers causes theworld price of televisions to fall by $100. Draw agraph to show how this change affects the welfareof U.S. consumers and U.S. producers and how itaffects total surplus in the United States.b. After the fall in price, consumers buy 1.2 milliontelevisions, of which 200,000 are produced domesticallyand 1 million are imported. Calculate thechange in consumer surplus, producer surplus,and total surplus from the price reduction.c. If the government responded by putting a$100 tariff on imported televisions, what wouldthis do? Calculate the revenue that would beraised and the deadweight loss. Would it be agood policy from the standpoint of U.S. welfare?Who might support the policy?d. Suppose that the…Question ; Check all true statements below. Select one : O. Export tariffs hurt consumers O. Import tariffs hurt consumers O. If a a country is a large supplier of some good on the world markets, it can affect world prices with an import tariff on this good. O Import tariffs assist domestic producers
- E4 Home’s demand curve for wheat is D = 200 − 40P Its supply curve is S = 40 + 40P Derive and graph Home’s import demand schedule. What would the price of wheat be in the absence of trade? Now add Foreign, which has a demand curve D∗ = 160 − 40P and a supply curve S ∗ = 80 + 40P 1. Derive and graph Foreignâs export supply curve and find the price of wheat that would prevail in Foreign in the absence of trade. 2. Now allow Foreign and Home to trade with each other, at zero transportation cost. Find and graph the equilibrium under free trade. What is the world price? What is the volume of trade? Home imposes a specific tariff of 0.5 on wheat imports. 1. Determine and graph the effects of the tariff on the following: (1) the price of wheat in each country; (2) the quantity of wheat supplied and demanded in each country; (3) the volume of trade. 2. Determine the effect of the tariff on the welfare of each of the following groups: (1) Home import-competing producers; (2) Home…7. Consider a country that imports a good from abroad.For each of following statements, state whether it istrue or false. Explain your answer.a. “The greater the elasticity of demand, the greaterthe gains from trade.”b. “If demand is perfectly inelastic, there are no gainsfrom trade.”c. “If demand is perfectly inelastic, consumers donot benefit from trade.”Homework: International Trade and Comparative Advantage PRICE (Dollars per bushel) 440 415 300 365 340 315 290 265 240 215 190 A tariff of Supply Demand Pw 0 30 60 90 120 150 180 210 240 270 300 QUANTITY (Thousands of bushels of wheat); A tariff set at this level would raise S per bushel will achieve this. Market for Wheat In New Zealand Price (Dollars per bushel) Domestic Demandi (Thousands of bushels of wheat) 365 If New Zealand is open to international trade in wheat without any restrictions, it will import Suppose the New Zealand government wants to reduce imports to exactly 60,000 bushels of wheat to help domestic producers. 90 Domestic Supply (Thousands of bushels of wheat) in revenue for the New Zealand government. bushels of wheat. 210