Question 1 agronomia is a small country that takes the

Assignment Help International Economics

Reference no: EM13373378

Question 1. Agronomia is a SMALL country that takes the world price of corn as given. Its domestic supply and demand for corn is given by the following:

D = 45 - 3P and S = 3P - 9

a. Assume initially that Agronomia does not open to trade. What is the autarky (no trade) equilibrium price and quantity?

b. Suppose Agronomia decides to engage in trade. Determine the quantity demanded, quantity supplied, and import given the world price (P^w) of $6 per bushel of corn. (Hints: Plug P^w into original equations).

c. If the Agronomia government imposes a tariff in the amount of $1 (i. e. t = $1), what is the new domestic price? What is the amount imported? (Hints: Plug the new domestic price into original equations).

d. Graph your results! (Hints: Figure 8-5 page 249).

e. Calculate consumer surplus, producer surplus, and government revenue BEFORE and AFTER tariff is applied.

f. Calculate the terms-of-trade gain. Explain.

g. What is the net effect of the tariff on Agronomia's welfare?

Question 2. Refer to Problem 1 above. Suppose the Agronomian government applies an import quota that limits imports to 12 bushels.

a. Determine the quantity demanded, quantity supplied, and new domestic price with the quota. Remember, for every level of import quota (in perfect competition), there is an equivalent import tariff that would lead to the same Home price and quantity of imports. Here is how to get the new domestic price with quota: subtract supply from demand, then equate with quota limit, which is 12 bushels.

b. Calculate the quota rent.

c. Assuming that the quota licenses are given to domestic producers, what is the net effect of the quota on Agronomia's welfare?

d. Assuming that the quota rents are earned by foreign exporters, what is the net effect of the quota on Agronomia's welfare?

Reference no: EM13373378

Questions Cloud

Can i please get assistance with : can i please get assistance with this

Kalvin crook is contemplating a life of crimenbsp if he : kalvin crook is contemplating a life of crime.nbsp if he commits a crime and does not get caught he stands to gain

Mary expects to retire in five years she is considering one : mary expects to retire in five years. she is considering one of three possible career changes. each has different costs

Jane is trying to decide which of three career paths to : jane is trying to decide which of three career paths to pursue. the first one requires one year of training at a cost

Question 1 agronomia is a small country that takes the : question 1. agronomia is a small country that takes the world price of corn as given. its domestic supply and demand

The clean air act instituted trades between states for so2 : the clean air act instituted trades between states for so2 emissions. several utility companies across geographic

1 present your data in a table showing the names of the : 1. present your data in a table showing the names of the variables. make sure the full definitions and sources of each

The village of pescatore is situated next to a medium sized : the village of pescatore is situated next to a medium sized lake in which citizens can fish from privately owned boats.

Should the australian commonwealth government and the : should the australian commonwealth government and the various australian state and territory local government grants

User Account

All Pages