Problem 1. In planet Krugman there are only two large countries, A and B. Demand (D) and supply (S) of a given good in each country are characterized by the following conditions: DA: P = 600 – 5Q SA: P = 400 – 5Q DB : P = 600 - 6Q SB: P = 300 + 2Q Assume all production is consumed. Pay also attention to the fact that the setup here involves just one good. a) Derive the autarky equilibrium prices and quantities in both country A (PA, QA), and B (PB. QB), separately. b) Derive the the free trade equilibrium price (Prr).

Problem 1. In planet Krugman there are only two large countries, A and B. Demand (D) and supply (S) of a given good in each country are characterized by the following conditions: DA: P = 600 – 5Q SA: P = 400 – 5Q DB : P = 600 - 6Q SB: P = 300 + 2Q Assume all production is consumed. Pay also attention to the fact that the setup here involves just one good. a) Derive the autarky equilibrium prices and quantities in both country A (PA, QA), and B (PB. QB), separately. b) Derive the the free trade equilibrium price (Prr).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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