Calculate the world price of an ipod

Reference no: EM13239902

Consider the Home country with the demand curve for iPods given by
P = 500 -10Q, and the Home supply curve given by
P=40Q. Now assume that Home is a large economy, which trades with the rest of the world.
Assume that the Foreign export supply curve is given by
P=2Qexp.
(a) Calculate the world price of an iPod. How much is imported by Home at this price?
(b) Assume that the government at Home decided to use the import tariff of $100. Calculate the new world price, the new imported quantity and the tariff revenues collected by the government.
(c) Compare the tariff revenues calculated in parts (b) and (d). If they are the same, does it mean that the government in each case will achieve the same welfare gains?

Reference no: EM13239902

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