Consider a small (home) country with the following inverse demand of: P = 200 − 3QD and inverse supplyof: P = 20 + QS for a barrel of oil. The world demand is perfectly horizontal with a price of: P^X = 100.Solve the following for the home country:A) Calculate the equilibrium price and quantityB) Calculate the consumer surplus, producer surplus (note the shape), and total surplusNow, suppose the home country opens up to free trade.C) Calculate the quantity supplied, quantity demanded, export quantity, and priceD) Calculate the consumer surplus, producer surplus, and total surplusNow, suppose the home country is open to free trade and provides an export subsidy of $15 per barrel of oil.E) Calculate the equilibrium price and quantityF) Calculate the consumer surplus, producer surplus, tax revenue, and total surplusG) Explain how the three outcomes: no trade, free trade, and trade with an export tariff, affect the homecountry (consumers, producers, and overall welfare)H) What changes if the home country replaces the export subsidy with a subsidy on all domestic production?
Consider a small (home) country with the following inverse
of: P = 20 + QS for a barrel of oil. The world demand is perfectly horizontal with a
Solve the following for the home country:
A) Calculate the
B) Calculate the
Now, suppose the home country opens up to free trade.
C) Calculate the quantity supplied, quantity demanded, export quantity, and price
D) Calculate the consumer surplus, producer surplus, and total surplus
Now, suppose the home country is open to free trade and provides an export subsidy of $15 per barrel of oil.
E) Calculate the equilibrium price and quantity
F) Calculate the consumer surplus, producer surplus, tax revenue, and total surplus
G) Explain how the three outcomes: no trade, free trade, and trade with an export tariff, affect the home
country (consumers, producers, and overall welfare)
H) What changes if the home country replaces the export subsidy with a subsidy on all domestic production?
Step by step
Solved in 2 steps
