Problem 4 Given conditions of Problem 2 and starting from free trade, assume that Foreign offers exporters a subsidy of 1.5 per unit. Calculate the effects on the price in each country and on welfare, both of individual groups and of the economy in both countries. 1 ECON 420 - International Economics. Spring 2024. Problem Bundle 2 Problem 5 The nation of Cologne is 'large', but unable to affect world prices. It imports chocolate at the price of $20 per box. The demand curve is D = 700 - 10P and the supply curve is S = 200 + 5P. Determine the free trade equilibrium. Calculate and graph the following effects on an import quota that limits imports to 50 boxes: The increase in the domestic price. The quota rents. The consumption distortion loss. The production distortion loss. Problem 6 A small country can import a good at a world price of 5 per unit. The domestic supply curve of the good is S = 10 + 10P and demand curve is D = 600-5P. In addition, each unit of production yields a marginal social benefit of 15. Calculate the total effect on welfare of a tariff of 10 per unit levied on imports. Calculate the total effect of a production subsidy of 10 per unit. Why does the production subsidy produce a greater gain in welfare than the tariff? What would the optimal production subsidy be?