Solution-Derive home import demand curve

Derive home import demand curve

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Reference no: EM132417082

Problem: Based on the information below about the production structure, explain whether the technology used in each part demonstrates constant returns to scale (CRS) or increasing returns to scale (IRS) property. Consider the Home country with the demand curve for coffee given by P = 100 -Q, and the Home supply curve given by P=Q, where P is the price per pound. Assume that the Home country opens up to trade and that it is a large economy. Assume that the Foreign export supply curve is given by P=2Qexp, where Qexp is the quantity exported from the Foreign country to the Home one.

Required:

(a) Derive Home's import demand curve (the exact equation). Using this equation, calculate the world price ofook. How much is imported by Home at this price?

(b) Assume that the government at Home decided to use the import tariff of $10. Calculate the new world price and the new imported quantity.

(c) What are the welfare gains (or losses) from this import tariff compared to the free trade case? Please show these welfare changes graphically.

Reference no: EM132417082

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Derive home import demand curve

Reference no: EM132417082

Reference no: EM132417082

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