The following two equations represent the domestic dem
Question and Solution
The following two equations represent the domestic demand and supply schedules of bikes for Country L. Here we assume
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The following two equations represent the domestic demand and supply schedules of bikes for Country L. Here we assume that country L is "large" (price maker) relative to the rest of the world (ROW) and imports bikes from the ROW. Qd= 540/150 - 1/150*P P: $/bike
Qs = -210/150 + 1/150*P Q: Quantitty measured in millions
The foreign exports schedule (from the ROW) is provided as follows: QEX = -3 + 1/50*p
a)What is the international price (i.e., free trade price) and traded quantity of bike? b)A specific tariff of $75 is imposed on each imported bike. How much is the new price of bike that domestic consumers have to pay? c)Follow b, how much is the new price of bike that foreign exporters receive? d)How large is the deadweight loss? e)Is it worth to impose this specific tariff?
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