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Assume a large world economy with several countries. There is a good that can be produced domestically by every country in the absence of trade. Suppose Country 1 has the following demand and supply curves for this good: D1= 28-2P and S1= 2P-4. For the rest of the world (without Country 1) demand and supply curves are Dw1= 500-25P And Sw1 = 100P. Answer the following questions (where necessary, round to two decimal places). (a) If Country 1 initially does not trade with the rest of the world, what are its equilibrium price and quantity? (b) Find consumer surplus for Country 1 when it does not trade. (c) Show why Country 1 will become an importer of the good, once we allow international trade. (d) With free international trade what are the world price and quantity Country 1 imports? (e) After intensive lobbying efforts domestic producers in Country 1 get some protection in a form of a $1.00 tariff What are the domestic price in Country 1 and price on the world market? (f) How do imports of Country 1 change? By how much? (g) By how much does consumer surplus change as a result of tariff? (h) What is the net effect of the tariff on Country 1? (i) Would you recommend for Country 1 to repeal the tariff? Why or why not?
In spending all his income on beer and pizza, Fred finds that the marginal utility of the last pizza is currently 8, the marginal utility of the last bottle of beer is 4, and the price of a bottle of beer is $1.50. If Fred has maximized his utility, ..
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Find the upper and lower bounds on the prices of the European Call and the Put options and then find their ranges. (i.e. all possible values).
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Describe the budget constraint which she faces when deciding how many drinks to buy.
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Zamen is a small country located in the midst of the Atlantic Ocean. It is completely isolated: no one goes there, no one leaves. One half of Zamen’s working age population is unemployed. What are the short run effects of Zamen’s sweater export on th..
Describe the two major types of administrative agencies: executive and independent. Why is it important to have independent agencies?
Illustrate what was the growth rate of nominal GDP between 1996 also 1997. Why do economists use real GDP per capita to measure the economic progress.
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