Aoslia is a small country that takes the world price of corn as given. Its domestic supply and demand for corn are given by the following:

a. Assume initially that Aoslia does not open to trade. What is the no-trade equilibrium price and quantity?

b. Suppose Aoslia decides to engage in trade. Determine the quantity demanded, quantity supplied, and quantity imported given the world price of $6 per bushel of corn.

c. If the Aoslia government imposes a tariff in the amount of $1, what is the new domestic price? What is the amount imported?

d. Determine the effect of the tariff on the Aoslian consumers, producers, and government

e. Calculate the terms-of-trade gain. What is the net effect of the tariff on Aoslia’s welfare? Explain.    

Transcribed Image Text:

D=45-3P| S = 3P-9