Transcription of Economics 181: International Trade Homework # 4 Solutions
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Economics 181: International Trade Homework # 4 Solutions
Economics 181: International TradeHomework # 4 SolutionsRicardo Cavazos and Robert SantillanoUniversity of California, BerkeleyDue: November 21, 20061. The nation of Bermuda is small and assumed to be unable to affect world prices. It importsstrawberries at the price of 10 dollars per box. The Domestic Supply and Domestic Demand curvesfor boxes are:S= 60 + 20PD= 1160 15P(a) Assume Bermuda is Completely open to Trade . What is the equilibrium price and quantityconsumed? How much is produced domestically, and how much is imported?Sine they are open to Trade , the equilibrium price will be determined by the world market. There-fore, using the Domestic Supply and Demand equations, and recognizing that Import Demand isgiven byMD=D S= 1100 35P, we get:Pw= 10D= 1160 15 10 = 1010S= 60 + 20 10 = 260MD= 1100 35 10 = 750(b) Now consider the effect of an import quota of 400 boxes.
Nov 21, 2006 · Economics 181: International Trade Homework # 4 Solutions Ricardo Cavazos and Robert Santillano University of California, Berkeley Due: November 21, 2006 1. The nation of Bermuda is “small” and assumed to be unable to affect world prices. It imports strawberries at the price of 10 dollars per box. The Domestic Supply and Domestic Demand curves
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