How to Submit assignments.pdf\" Having carefully read these documents, please pr

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How to Submit assignments.pdf" Having carefully read these documents, please proceed the respond to the following questions As a World Bank economist, you are given the following information about demand and supply conditions for product X in countries A and B. 0b-70-2P 0 10+2P p-70-2P Demand for X in Country A: Supply of X in Country A: Demand for X in Country B: Supply of X in Country B: Answer the following questions based on the information provided: 1. Which country has comparative or absolute advantage in producing X? Since for both countries Demand function is same for same Price but they only differ in Supply Function and for Country A sppply function=10+2p> 4+P(supply function for B) for same price hence A will be having absolute advantage in producing X 2. What are the equilibrium price and quantity in country A under autarky? Under Autarky Country will be self-sufficient and hence Demand will equal to supply this gives: 70-2P-10+2P this gives P-15 and Q-0.-40 3. What are the equilibrium price and quantity in country B under autarky? Q,Qs therefore 70-2P- 4+P this gives P-22 and Q.-Q-26 4. Suppose countries A and B decide to engage in international trade. a. What is the price they agree on to exchange product X? If international Trades is there then Total Q.-Total Qs this gives 140-4P-14+3P therefore P-18 and Q-68

Explanation / Answer

Answer 5.

Similarly for B. After this, substitute the values for P.

Answer 6. Gain to A is the net gain multiplied by the price P.

Net gain = 12 units + Price/unit.

Substitute for P and then similarly find for B.

Answer 7. B is importing 12 units. Thus, after the 6 units, B should put a high price on imports. This should be greater than the gain that they would have had in case they exported 6 more units. Thus higher than 6*P.

Before After Country A consumer surplus 70- 2P - 10 - 2P consumer surplus 2(70 - 2P) - 10 -2P Country B consumer surplus consumer surplus Country A Producer surplus e 10 + 2P - 70 + 2P Producer surplus 10 + 2P - 2(70-2P) Country B producer surplus m producer surplus

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