and Norwegian suppliers face the
following supply equation P=20+ 0.5QS. Further suppose the world price of wi-fi speakers is
PW=$60.
a) Draw a graph for the above supply and demand functions. Numerically calculate social
welfare (SW) in the Norwegian market for wi-fi speakers in autarky.
b) What would be social welfare in Norway for wi-fi speakers under free trade? Also, label
your graph in part (a) showing the level of imports.
c) What would social welfare be under a tariff = $20?
d) What if the Norway instituted an import quota = 90 for wi-fi speakers. What would be the
resulting level of social welfare? Suppose the "quota rent" goes to foreign suppliers.
e) What would be social welfare under a producer subsidy = $20?
f) Which of the following trade policies would you recommend if trade in wi-fi speakers
appeared to be negatively affecting Norwegian workers in the industry? Why?
g) Now suppose that the US market for wi-fi speakers is dominated by a monopolist, suppose
the US places a quota equivalent to the amount of imports in part (d).
i) Derive the equation for the residual demand function.
ii) Find the profit maximizing quantity of production for the
monopolist and the profit maximizing price.
iii) Calculate the loss of consumer welfare when we go from a tariff to a quota.