A perfectly competitive industry faces domestic demand
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A perfectly competitive industry faces domestic demand

A perfectly competitive industry faces domestic demand qd 5 100 – p and has the industry supply curve qs 5 40 1 p. 

(a) If the world price is £50, what is the value of net exports?

(b) If the world price is £20, what is the value of net exports? 

(c) In the absence of trade, what is the equilibrium domestic price?

(d) At a world price of £20, suppose the government levies a tariff of £5 per unit. 

Calculate the value of tariff revenue and the total value of the two deadweight loss triangles.

Hint
Accounts & Finance A perfect competitive industry refers to a market structure where competition is at its greatest level possible. In a perfect competitive industry all producers and consumers have full and symmetric information on prices, no transaction costs, there are entry barriers, have many buyers and sellers. ...

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