Homework $1-$ Part $1$

In a world with two countries:

Autarky:

Graph the equilibrium for each country

Calculate consumer and producer surplus for each country

Calculate the total surplus for the world economy

Trade without frictions:

Calculate the world equilibrium price and quantities traded

Calculate consumer and producer surplus for each country

Calculate the total surplus for the world economy

Trade with tariffs.

Assume the importing country imposes a $$10$ tariff.

Calculate the world equilibrium price and quantities traded

Calculate consumer and producer surplus for each country

Calculate the total surplus for the world economy

Country $1$:

$P^d=50-\frac{1}{4}{Q}^d$

$P^s=10+2Q^s$

Country $2$:

$P^{d**}=50-2Q^{d**}$

$P^{s**}=5+\frac{1}{2}{Q}^{s**}$