Reference no: EM13140288

Question 1: Suppose the market for semiconductors in the U.S. is characterized by

Q_d = 200 - 40P        [Demand]

Q^s = 40 + 40P         [Supply]

The market for semiconductors in the rest of the world is characterized by:

Q_d = 160 - 40P        [Demand]

Q_s = 80 + 40P         [Supply]

Suppose the U.S. government imposes a quota of 24 million units on its imports of semiconductors. Calculate the magnitude of the deadweight loss resulting from the quota under the assumption that the U.S. is a small open economy. [Note: P = price per unit; Q_d = millions of units demanded; Q_s = millions of units supplied]

Question 2: Suppose the market for wine in the U.S. is characterized by

Q_d = 200 - 40P        [Demand]

Q_s = 40 + 40P         [Supply]

The market for wine in the rest of the world is characterized by:

Q_d = 160 - 40P        [Demand]

Q_s = 80 + 40P            [Supply]

Calculate the change in deadweight loss if the U.S. replaces a prohibitive tariff per unit on imported wine by an equal production subsidy per unit of wine sold by U.S. producers. [Note: P = price per unit; Q_d = billions of units demanded; Q_s = billions of units supplied]