Question 1: The Optimal Tariff Rate
Suppose home country Hogwarts is a big country and is a net importer of Bezoar. The demand for Bezoar in the home country is
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Q = 80 ? p. The domestic supply is
Q = 2 p ? 10 and the foreign country’s export supply is
Q = 3 p ? 6.
(a) Find the free trade equilibrium