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YoHoJo
01-20-2012, 05:04 AM
1. Two regions have the following supply and demand functions for jumbo prawns:

Dus = 60,000 - 3000 Pus
Sus = -20,000 + 2000 Pus

DF= 50,000 - 5000 PF
SF = -10,000 + 2500 PF

a. Assuming autarky (no trade possible), sketch the supply and demand functions for each country. Find the minimum, maximum and equilibrium price in each market, and the quantity produced /consumed. Calculate consumer and producer surplus in each region.
b. If trade is opened, who will import and who will export? What is the relevant range that the world price will fall within? (verbal answer, before solving). Derive the import demand and export supply curves for this range of prices (write their formulas), checking to see whether either function is kinked in the relevant price range. Now, solve for the equilibrium world price.
c. Sketch the import demand and export supply curves from part b, for the relevant price range. How much is produced, consumed, and exported or imported, in each country? What is the net effect of free trade on each region's total social welfare? On world social welfare? Who gains, and who loses from trade within each country (verbal answer)?


Should be relatively simply, I'm just really rusty.
Please explain work etc etc for whatever parts you tell.