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domestic supply function




The demand function is given by Qd=1000-Pd, and the domestic supply function is given by Qs=3Ps. Answer the following.;a) find the equilibrium;b) Suppose the same comoodity is available int he world market at $200 for unlimited amount. If free trade is allowed, what would be the equilibrium price, and the equilibrium quantity? Compare the social total surplus with that in a.;c) Assume further the government imposes the tariff of $20 per unit. Find the new equilibrium domestic price, the quantity supplied by the domestic firms, the quantity imported and the government tariff revenue. Compare the social total surplus with the ones in (a) and in (b).;d) Assume instead the government wants to set the import quota at 120 units. Draw the new market supply curve, and find the equilibrum price and quanityt. Does the import reach the quota? Is the equilibrium price higher than the world free trade price? How many units are produced by the domestic firms? Find the consumer surplus, the domestic producer surplus, the importer's profit, and the social total surplus. Compare with c.


Paper#25693 | Written in 18-Jul-2015

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