Consider the market for blueberries (a homogeneous product) in Madagascar, which is con- sidered a small country. Demand

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Consider The Market For Blueberries A Homogeneous Product In Madagascar Which Is Con Sidered A Small Country Demand 1 (233.97 KiB) Viewed 32 times

Consider the market for blueberries (a homogeneous product) in Madagascar, which is con- sidered a small country. Demand for a good is given by Qd = 100 – P. Domestic supply for the good is given by: Qs = P. Each country that exports blueberries has different marginal cost: $30 per crate in South Africa, $25 per crate in Peru, and $20 per crate in Chile. 1 (a) Calculate the price, domestic output, consumption, imports, consumer surplus, and producer surplus associated with blueberries in the Madagascar free-trade equilibrium. (b) In the free-trade equilibrium, how many crates of blueberries are imported from each of the three source countries? (c) Calculate the price, domestic output, consumption, imports, consumer surplus, pro- ducer surplus, and government revenue associated with blueberries if Madagascar adopts a $15 MFN tariff on all WTO members. How many crates of blueberries are imported from each of the three source countries? (d) With the adoption of a Southern African Free Trade Agreement (SAFTA), farmers in South Africa can export to Madagascar tariff-free. Calculate the price, domestic out- put, consumption, imports, consumer surplus, and producer surplus in the Madagascar blueberry market. How many crates of blueberries are imported from each of the three source countries? (e) Compared to your answer from part (c), did SAFTA increase or decrease welfare in Madagascar? By how much? What can you conclude about the relative effects of trade creation and trade diversion as a result of the agreement?