Question

1. (40 points) Refer to the graph below to answer the following questions Home's Import-Competing Industry Note: All curves are linear Price A Supply Po 100 B Pw 50E Demand 800 1300 1700 Quantity Home is a "small country" in this market. PD and Pw are and worldwide, respectively prices domestically (that is, in autarky) linear, what are the values of the price at the figure these a. Given that the demand and supply intercepts A and F? [Hint: There is enough information on this graph values out, and the values are important to do the calculations below. Once you figure these out it might not be a bad idea to write down the equations of the curves in slope- intercept form. NOTE: F will be a negative number!! It's weird, but don't worry about it Proceed with the rest of the problem as usual.] b. With trade, what is the quantity of imports? What is the con curves are to 1 sumer surplus to H in autarky? What is CS with trade? C. d. What is the producer surplus to H in autarky? What is PS with trade? e. What are the gains from trade to H? Now suppose H imposes a tariff of 20% on imports of this good. f. What is the quantity demanded after the tariff? What is the Consumer Surplus? g. How much is domestically supplied after the tariff? What is the Producer Surplus? h. What is the tariff revenue? i. How large is the deadweight loss from the tariff?

Answer 1

Qc 8O 6 At P 50 aD- Qs 1700 - 800 =900 odwr Qutering( CS wmdex (262-5-100)x lo532S x 130 O = CSa under radı ( f (?00, Pw- S 0) CS 2625-50 1806 2 5 wndex austerky Ca*- PS 45 500 (100-30) PSa x 130 0 ( Q7- 1800 , P* 50) PS under rade (50-80) PST оов х Swepho before trads: CSa t Psa : 151 I 2 5 e) Tota Swcps aftex trade: eS CSTPS T Total 188 625 188 62 5 - iSI(25 Gain from rade = 33 500 eswit o20*l. \axiff the wor Id As O ises o : Price Ptt = \'2 * 5O = At Pt Demand :P-26 2 .5 -o12 5 a, 262 5 60 O125 26 2 S- 6 o) 1620 -|164 025

30 +о'1 Q P suppg %) The a00 At Pwt х а00 PStaniff 13 500 Tarif (1620-900) х 10 TR revemuue 720O tolal swp after trade '. Thun C t PS tariff T 200 3 50 O 184 3 3 5 before Aariff \ 8 8625 Tolal Swrpwo was 184725 18 8 6 25 DWL 3900