Figure W: The market for docks in Italy with S is the supply curve of Italian pr

Question

Figure W: The market for docks in Italy with S is the supply curve of Italian producers and D s lan consumers demand curve. The horizontal axis labeled "Q" measures the quantity of cdacks. The vertical axis labeled "P" measures the price per clock. PHome $25, is the price of a dock in Italy when Italy does not participate in international trade. world -$10, is the price of a ock in Italy when Italy partiaipates in international trade. world+ariff $10 + S5 = $15, ia the price of a clock in Italy when Italy participates in trade and the Italian government imposes a tariff of S5 per dock. $25 $15 $10 home world tariff a2 1 b2 b3 b4 world al 25,000 Based on Figure W, assuming Italy's market for clocks is at equilibrium what is Price and Quantity when Italy does NOT participate in international trade? O A P 10, Q 10000 O B. P 1s, Q 12000 C. P = 15, Q = 60000 ( ) D P-25, Q 25000 QUESTION 20 Based on Figure W, when Italy does NOT participate in international trade, Italy's producer surplus equals the area(s) labeled B. aa3a4 oCaa2a3 O D c1+ c2

Explanation / Answer

(Question 19) (D)

Without trade, domestic equilibrium is at intersection of demand and supply curves.

(Question 20) (C)

Without trade, producer surplus is the area between equilibrium price and domestic supply curve.

(Question 25) (A)

With trade, relevant price is PWorld = $10, and which Domestic demand = 60,000 & Domestic supply = 10,000.

Imports = 60,000 - 10,000 = 50,000

(Question 26) (B)

At a price of $15, domestic supply is 42,000.

(Question 27) (C)

With tariff, Consumer surplus = Area between domestic demand curve and P(world + tariff).

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