35-37. The market for widgets has the following supply and demand curves: P 10 (

Question

35-37. The market for widgets has the following supply and demand curves: P 10 (1/3)Q P = 100-(1/2X2 Supply: Demand: Initially, the market is in equilibrium at P = $46, Q = 108 . Questions 35 through 37 concern this market. 35. Suppose the government opens the border to free trade in widgets and foreign suppliers have a perfectly elastic supply at a price of $40 per unit. As a result the dollar value of widget imports is: A) SO F) $1200G S5520 H) S4140 I $2400 J) none of the above B) S40 C) S3600 D) S4800 E) $1380 36. As a result of trade (rounded to the nearest dollar) the gain to society has changed by: A) -S684 B) +S684 C) -S594 D)+S594 E) -S90 G) -$1278H) +S1278 I) S0 F) +S90 J) None of the above 37. Suppose a new study comes out that identifies widgets as a source of a health hazard, exposure to them causes cancer. The study estimates that the total global external cost of widget production and consumption is given by the following expression TEC =-O Now determine (rounded to the nearest dollar) the total gain to society (not the change in gain to society) after free trade: A) $1350 B) S3600 C) S2400 D) S2500 E) $2550 F) $6000 G) $7350 H S4950 I) $4860 J) None of the above

Explanation / Answer

Ans. 35) (C) $3600

Supply at $40 per widget =90 units

total imports= 40*90= $3600

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