Question

Suppose a small country produces Wheat (W) for domestic consumption where the national demand and supply curves are given as:

National Supply: P=10+2 W
National Demand: P=100−W
What are the autarky price and quantity at market equilibrium?

Answer 1

In a world without trade, the autarky price is $70 and the autarky quantity is 30.

Step-by-step explanation:

In a world without trade, the equilibrium price and quantity can be determined by finding the point where the national demand and supply curves intersect. In this case, the national supply curve is given by P=10+2W and the national demand curve is given by P=100−W. To find the equilibrium price and quantity, we need to set the two equations equal to each other:

10+2W = 100−W

Solving for W, we get W = 90/3 = 30. Substituting this value back into either equation, we find that the equilibrium price is P = 100−30 = 70. Therefore, in a world without trade, the autarky price is $70 and the autarky quantity is 30.