1. The Following Equations represent a small country's home supply and demand curve for widgets: S=0 +2P and D= 1,000 - 2P
A. Find the equilibrium price and quantity for widgets in autarky
B. Now let the world price be $200. Find domestic production, domestic consumption, and the amount of imports.
C. Derive the country's import demand curve for widgets.
D. Let the country impose a 10% tariff. Calculate its deadweight Losses.
2. Suppose the U.S dollar interest rate is 3%, while the interest rate in the United Kingdom is 6%. Your friend thinks he can convert his dollars, invest in the United Kingdom and convert his pounds back into dollars at the end of a year, allowing him to make a lot higher return. Assuming uncovered interest partiy (UIIP), explain why he is incorrect.