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z Medical Questions

Your Question

1.The nation of Acirema is “small,” unable to affect world prices. It imports peanuts at the price of $10 per bag. The demand curve is D=400-10P. The supply curve is S=50+5P.
Determine the free trade equilibrium. Then calculate and graph the following effects of an import quota that limits imports to 50 bags.
a. The increase in domestic price.
b. The quota rents.
c. The consumption distortion loss.
d. The production distortion loss.









2.A small country can import a god at a world price of 10 per unit. The domestic supply curve of the good is S=50 +5P. The demand curve is D= 400-10P.
In addition, each unit of production yields a marginal social social benefit of 10.
a. Calculate the total effect on welfare of a tariff of 5 per unit levied on imports.
b. Calculate the total effect of a production subsidy of 5 per unit.
c. Why does the production subsidy produce a greater gain in welfare than a tariff?
d. What would the optimal production subsidy be?

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