1.The point E is the Equilibrium point, in this point it means that demand and supply can get the maximum quality and price, so the price will be $40, and the quantities of the demand is 200, the producer of quantities is 200.
2.i: under free trade
Under free trade the price of bananas is P=$10 per box. And the nation consumes 500 boxes. The quantity of bananas produced is 50 boxes. Thus, the nation needs to import 450 boxes (BC).
With the tariff
Because of impose of the 100%, so the price will be 10*(1+100%) =$20 so the demand of the band is 400 boxes, and producer is 100 boxes, so the country should import 300 boxes.
3. The consumption effect of the tariff: domestic consumption decreases 500-400=100 boxes (BH);
The production effect of the tariff: domestic production increases 100-50=50 boxes (CJ);
The trade effect of the tariff: decline in imports 450-300=150 boxes (CM+BN);
The revenue effect is 300boxes*10= $3000 (JMNH).
4. before import tariff: the consumer surpluses is equal to the area ABR=$ 500*50*0.5= $12500; After import tariff: the consumer surpluses is equal to the area GHR=$ 400*40*0.5= $8000
The dollar values of change in the consumer surpluses is equal to the area ABR -GHR) = $12500-8000=$4500 Thus, the consumer surpluses decreases AGHN=$4500.
Before import tariff: the producer surpluses is equal to the area OCA=$ 10*50*0.5= $250;
After import tariff: the producer surpluses are equal to the area
OJG=$ 20*100*0.5= $1000
The dollar values of change in the producer surpluses is equal to the area ACJG (OJG-OAC) = $1000-250=$750 Thus, the producer surpluses increases $750.
5. The deadweight loss of the tariff is equals to the shaded areas CMG+HNB=$10*50*0.5+$ 10*100*0.5= $250+500=$750
1.Because of now spot rate=$2/1 and after three month the forward rate =$1.96/1 it means in the three month that the dollars will appreciation (2-1.96)/2=2% or pound will deprecation 2% so in the three month the man should pay more10000*2%=200pond
a. Buy at the current spot rate and deposit the receipts in an interest earning account until the funds are needed.
b. Buy a forward contract i:Typically entails paying a forward premium, increasing the cost of the transaction.
c. Buy a call option i:If not exercised, the premium is lost.
2. Because of now spot rate=$2/1 and after three month the forward rate =$2.05/1 it means in the three month that the three month that the dollars will deprecation (2.05-2)/2=2.5% or pound will appreciation 2.5%
So the guy will earn 10,000*25%=250pound.
So the man should the purchase of a foreign currency when the domestic price rises, in the expectation that it will rise even higher.
When the price $1.95/1pound instead of $2.05/1
The dollars will appreciation (2-1.95)/2=25% or pound will depreciation 25%
So the guy will lose 10,000*25%=250pound
So the man should sale of a foreign currency when the domestic price falls or is low, in the expectation that it will fall even lower
PART C: ESSAY QUSTION
In recent years, the developing courtiers economic have a big improvement, and more and more developed country prefer to invest in developing counties rather than the own country. During this time the developing countries with a high economic growth rate. Especial for the BRICS (which china, India, Russia and Brazil), more and more foreign direct invest support the developing countries’ economic growth and solve the many native employee problems. Some economist even said that in the future developing country would be engine of world’s economy (Bamberry, 2011). Alone with the rapid development, there also exist some people began