11. Consider a market of laptops. Assume it’s a competitive market, the demand in the UK is QD = 9 P, the supply is QS = P 2. The foreign net export is QX = 2P 1.

(a) What is the price of a laptop if importing is banned?

(b) If laptops are free to import, what is the price of a laptop in the UK? What is the consumer surplus, producer surplus, total surplus, gains from trade?

(c) For import tariffs of t = 2, 4, 8, what is the price of a laptop in the UK? What is the consumer surplus, producer surplus, total surplus, gains from trade?

1212. Consider 3 countries, A, B and C, all of the same population of 1. Country A can produce 2 apples or 1 banana, country B can produce 1 apple or 1 banana, country C can produce 1 apple or 2 bananas.

    (a) Which country has a comparative advantage in producing apples when comparing to all other countries? Which country has a comparative advantage in producing bananas when com-paring to all other countries? What about the last remaining country?

    (b) Let’s say Country A and Country B participate in international trade, and Country C is staying in autarky. Who benefits from trade? What can you say about possible world prices in this trade?

    (c) Let’s say country C also joins the international trade, and

the world prices of apples and bananas become equal. Who benefits from trade? Who loses from trade compared to being in autarky? Would Country A be against Country C opening for trade? Would country B be against Country C opening for trade?

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