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STUDY QUESTIONS

1. The demand and supply functions for a product are given as Qd = 400 5P and Qs = -50 + 4P
respectively. A foreign trade company exports 135 units of the product. Calculate the change in
consumer surplus, producer surplus and social welfare because of foreign trade.
2. The demand and supply functions for a product are given as Qd=220 4P and Qs = -50 + 6P
respectively. The price of the product in international markets is given as 30$. Calculate the
change in consumer surplus, producer surplus and social welfare because of foreign trade.
3. The demand and supply functions for a product are given as Qd = 340 3P and Qs = -40 + 2P
respectively. A foreign trade company imports 70 units of the product. Calculate the change in
consumer surplus, producer surplus and social welfare because of foreign trade.
4. The demand and supply functions for a product are given as Qd = 200 4P and Qs = -40 + 2P
respectively. The world price of the product is 30$ and the government imposes a specific import
tariff of 5$. Calculate the change in consumer surplus, producer surplus, government revenue
and social welfare because of foreign trade.
5. The demand and supply functions for a product in a large country are given as Qd = 130 3P and
Qs = -30 + 2P respectively. The world price is 20$ and the large country imposes an ad valorem
tariff of %50. After the imposition of tariff world price decreases to 16$. Calculate the change in
consumer surplus, producer surplus, government revenue and social welfare as a result of
foreign trade.
6. The demand and supply functions for a product are given as Qd = 410 3P and Qs = -50 + 2P
respectively. The world price of the product is 60$ and the government imposes an import quota
of 100 units. Calculate the change in consumer surplus, producer surplus, quota rent and social
welfare because of the imposition of the quota.
7. The demand and supply functions for a product are given as Qd = 600 20P and Qs = -400 + 40P
respectively. The world price of the product is 20$ and the government imposes an ad valorem
export subsidy of %25 per unit of exports. Calculate the change in consumer surplus, producer
surplus, government revenue and social welfare because of the export subsidy.
8. The demand and supply functions for a product in two large countries are given as:
Country A Country B

Qd = 56 - 4P Qd = 110 4P

Qs = -4 + 2P Qs = -10 + P

The importing country imposes an ad valorem tariff of 20%. Calculate the change in consumer
surplus, producer surplus, government revenue and social welfare because of foreign trade in
the importing nation.

9. The sales price of a TV set is 800$ and the value of imported input is 600$
a. Calculate the effective rate of protection if the government imposes a %25 tariff on
imported TV sets.
b. Calculate the effective rate of protection if the government imposes a %25 tariff on
imported inputs.

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