Eurasia, a small country has a market for widgets. The demand for widgets is described as P=50-5QD. The demand for widgets is described as P=10+3QS.
1. What are the equilibrium price and quantity in autarky?
2. Eurasia opens to trade. The world price for widgets is 20. How much is imported into Eurasia?
3. Suppose a tariff of 2 is added. How much less is imported?
4. Show that Eurasia is better off without the tariff than with the tariff when they are trading.
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