Description
Where P is the world price, P1 is the world price after tariffs ( tax on imports), and P2 is the domestic equilibrium price.
- Find the total surplus (welfare) before trade?
- Find the total surplus after free trade? Please show the gains from trade?
- Show the welfare cost of the tariffs?
- Suppose that Anna is indifferent between 2 cellphones and 4 computers and George is indifferent between 1 computer and 2 cellphones.
Anna: 2 cellphones = 4 computers
George: 2 cellphones = 1 computers
- Find two examples of a trade between Anna and George that makes both better off?
- Should Anna give computers or cellphones to George?
- If George gives Anna 6 cellphones and receives 2 computers. If this a fair trade? Explain your answer.
