Hi, I was able to derive the foreign supply function and home demand function in world market as a function of the world price, but I'm stuck at solving these. Can I get some help with detailed explanations? Demand and supply in Foreign and Home market are characterized by the following functions, D* = 30-P*, S* = 2P*, D = 120 - P, and S = P where D, D*, S, and S* represent Home and Foreign demand and supply functions for a product called X, respectively, with P and P* denoting the local price of product X in Home and Foreign market, respectively. Now, derive the optimal specific tariff of Home that maximizes its total surplus, assuming that Foreign government is not reacting to such a tariff. Optimal specific tariff of Home = Derivation: Because the tariff considered in the former question will generate a negative effect on Foreign welfare (thus, a negative reaction from Foreign government), Home government is considering an alternative way to protect its domestic industry, namely VER (Voluntary Export Restraint). Calculate the level of export quota (the limit on Foreign export), q, under which Foreign welfare will not change from its free trade welfare level. You need to find such q that is strictly smaller than the free trade export level, of course. q= Derivation:
