A Question per day - Day 10

1. A perfectly competitive market in Country X has the following demand and supply curves:

(Demand) P = 1000 - 2Qd
(Supply) P = 200 + 3Qs

Assume that this market becomes part of the larger world market, a world market that we can describe as perfectly competitive (where the output from this market in Country X is a very small percentage of the overall world market output).

a. If the world price is $500, then how does this market in Country X change?
(you'll want to note changes in price, quantities supplied and demanded, and surplus)

b. How does your answer in "part a" change if Country X imposes a tariff of $99 on all imports?