Question: 4. Using the data from exercises 1 and 2, what would happen if Foreign were to offer a subsidy of 0.5 per unit? Calculate the

4. Using the data from exercises 1 and 2, what would happen if Foreign were to offer a subsidy of 0.5 per unit? Calculate the effects on price, in each country, and show the effects on welfare. Data:The supply and demand curves for home are given by D=100-20P S=20+20P; For foreign: D*= 80-20P S*=40+20P. Home (a small country) imposes a specific tariff of 0.5 on wheat imports.

5. A small nation 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. What would be the effect of introducing an import quota of 50 units? Determine the effects on: a. Domestic price. b. Consumer surplus. c. Producer surplus.

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