2. Consider the country ABC. The demand function for product A is Q=500-4P, the supply function Q=100+4P. a) Draw the demand and supply curves. Find the equilibrium price and quantity for this market. b) If there is a price restriction of maximum $100 per unit of product A, what will be the equilibrium price and quantity for this market. What is the size of the shortage? c) The world price is $100. Should this country trade internationally? What will be the value of export/import? Find the quantity of consumption and production, the domestic price, the consumer surplus and producer surplus before and after the trade. Compare the total surplus.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
2. Consider the country ABC. The demand function for product A is Q=500-4P, the supply function Q=100+4P.
a) Draw the demand and supply curves. Find the equilibrium price and quantity for this market.
b) If there is a price restriction of maximum $100 per unit of product A, what will be the equilibrium price and
quantity for this market. What is the size of the shortage?
c) The world price is $100. Should this country trade internationally? What will be the value of export/import? Find
the quantity of consumption and production, the domestic price, the consumer surplus and producer surplus
before and after the trade. Compare the total surplus.
d) Now suppose that the world price has decreased to $75. Should this country still trade? What will be the value
of export/import? Find the quantity of consumption and production, the domestic price, the consumer surplus
and producer surplus before and after the world price change.
e) Now suppose the government imposes a tax on producers of $30, so new supply function is Q=100+4(P-30).
What is the size of the shortage/surplus, the deadweight loss, the tax revenue, the price, the quantity supplied
and demanded? Will the international trade change because of tax? What will be the value of export/import?
Transcribed Image Text:2. Consider the country ABC. The demand function for product A is Q=500-4P, the supply function Q=100+4P. a) Draw the demand and supply curves. Find the equilibrium price and quantity for this market. b) If there is a price restriction of maximum $100 per unit of product A, what will be the equilibrium price and quantity for this market. What is the size of the shortage? c) The world price is $100. Should this country trade internationally? What will be the value of export/import? Find the quantity of consumption and production, the domestic price, the consumer surplus and producer surplus before and after the trade. Compare the total surplus. d) Now suppose that the world price has decreased to $75. Should this country still trade? What will be the value of export/import? Find the quantity of consumption and production, the domestic price, the consumer surplus and producer surplus before and after the world price change. e) Now suppose the government imposes a tax on producers of $30, so new supply function is Q=100+4(P-30). What is the size of the shortage/surplus, the deadweight loss, the tax revenue, the price, the quantity supplied and demanded? Will the international trade change because of tax? What will be the value of export/import?
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 7 steps with 2 images

Blurred answer
Knowledge Booster
Price Control
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education