Question

The government opens the market to free​ trade, and Indonesia enters the​ market, pricing coal at​ $1 per ton. The domestic price of coal will now be ​$ nothing per ton. ​(Round your response to two decimal places.​) The new domestic quantity supplied will be nothing million tons and the new domestic quantity demanded will be nothing million tons. ​(Enter your responses as integers.​)

Answer 1

Step-by-step explanation:

Before trade price is 1.75 and quantity is 125 million tons

After free trade, world price becomes domestic price so it is $1 per ton

At this price quantity supplied is 50 million tons and quantity demanded is 200 million tons

Amount of imported coal is the difference between QD and QS which is 200 - 50 = 150 million tons

Till 50 million tons, domestic supppliers supply. From 50 to 100 million tons, the foreign producers supply and after 100 million tons, domestic supply shifts so the new domestic price after quota is 1.50 per ton

At this price total supply is 150 million tons and total demand is also 150 tons. Domestic supply is 100 million tons and domestic demand is 150 million tons

New amount of imports are 50 million restricted by quota

Revenue to government is quota rents and it is (1.50 - 1.00)*50 million = 25 million. Revenue to producers is 0.5*(1.50 - 0.50)*100 million = $50 million