1. Suppose Imperfectland has a small, monopoly industry producing w...

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1. Suppose Imperfectland has a small, monopoly industry producing widgets. The demand curve for gadgets is given by QD - 50 - 4P and the marginal cost curve is given by QMc - O.SP. What is the autarky price for gadgets? What is the producer surplus? The consumer surplus? 2. Using the data from #1, what is the new producer surplus if the market were to open to international trade at a price of P =10? What is the new consumer surplus? What are the gains from trade? 3. Suppose 10%, Japan= 8%, and f($/¥) = 0.01. What does the C IP equation predict is the value of the spot exchange rate? 4. Using data from #3, suppose that the Fed increases the domestic money supply and the value of rus changes to 7% What does the CIP equation predict is the value of the spot exchange rate? Is the dollar getting stronger or weaker?

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