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Suppose a country was looking to replicate the results (quantity of imports) from question 7d (The...

Suppose a country was looking to replicate the results (quantity of imports) from question 7d (The following equations represent a small country's home supply and demand curves for widgets: S = 200 + 2P and D = 1,000 – 2P. <7d> Suppose the Supply curve is now S = 0 + 2P, the world price after opening up to trade is 200 and the demand curve remains the same. If the country subsequently imposes a 20% tariff, calculate the change in producer surplus between free trade and the tariff implementation (hint: you need to find a new equilibrium price and quantity to calculate the required areas).

above using quotas instead of tariffs

a. What will be the quota on widget imports?

b. What would be the deadweight loss if the country sold quota licenses to importing firms who did not engage in rent seeking activities?

c. What would be the deadweight loss if the country sold quota licenses to importing firms who instead engaged in rent seeking activities?

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Answer #1

S 2 P 100o - 2P Demamd D 240 (Put tavift) World price with 9uola must be: P 24O & D-Sa *. Quota> 000-2240-2(a40) 40 wnił b) D

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