ECON 475v6 Assignment 2F Answer all five questions in one file. Each question is worth 20
marks. Keep your answer concise. Use figures to illustrate your
point wherever possible. Show all your work and attach your graphs
when submitting your assignment for grading and feedback. 1. Â Assume perfect competition. Saleland is a small
country that takes world price of corn as given. Its domestic
supply and demand for corn is given by the following: Demand: D = 45 – 3P Supply: S = 3p – 9 a.  Assume initially that Saleland does not open to trade.
What is the autarky equilibrium price and quantity?b.
 Suppose Saleland decides to engage in trade. Determine the
quantity demanded, the quantity supplied, and import given the
world price of $6 per bushel of corn. c. If the government of Saleland imposes a tariff in the amount
of $1 (i.e., t=$1), what is the new domestic price? What is the
amount imported? 2. Â Describe in detail how the concept of demand reversal
affects the implications predictions of the Heckscher-Ohlin
model. 3. Â Briefly describe the Linder theory. What would this
theory suggest about the prospects developing countries have for
exporting goods to developed countries? Do you think this is a
realistic suggestion? Why or why not? 4. Â Explain how the Krugman model of trade works. Explain
the similarities and differences between the Krugman model and
Heckscher-Ohlin model. 5. Â Using a general equilibrium approach, point out the
real income loss from a tariff to a country. What is the consumer
welfare loss? Why might consumers prefer a production subsidy
rather than a tariff?
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This question was answered on: Sep 05, 2019
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