Assume that there are two countries in the world, Home and Foreign. Suppose that demand (D) and supply (S) of apples by the Home country can be characterized by the following two equations, where P is the price of apples at Home: D = 200 40PS = 40 + 40P Suppose that demand and supply of apples in the Foreign country can be characterized as follows, where Foreign variables are denoted with an asterisk (*): D* = 160-40P* S* = 80 + 40P* Show graphically and calculate the terms-of-trade gain, the efficiency loss and the total effect on welfare of the tariff imposed at Home.

Assume that there are two countries in the world, Home and Foreign. Suppose that demand (D) and supply (S) of apples by the Home country can be characterized by the following two equations, where P is the price of apples at Home: D = 200 40PS = 40 + 40P Suppose that demand and supply of apples in the Foreign country can be characterized as follows, where Foreign variables are denoted with an asterisk (): D = 160-40P* S* = 80 + 40P* Show graphically and calculate the terms-of-trade gain, the efficiency loss and the total effect on welfare of the tariff imposed at Home.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter13: General Equilibrium And Welfare

Section: Chapter Questions

Problem 13.11P

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