Bulgaria is a country assumed \"small\" in the strawberry market. It has the below domestic demand and supply equations: $S = 60 - 7P$ $D = 3000 - P$ The price of strawberries in the rest of the world is $340 per kilogram. 1) How much strawberries will Bulgaria export to the rest of the world in free trade? 2) Bulgaria introduces an export subsidy at $50 per kilogram of strawberries. Compute: a) The new price of strawberries in the rest of the world b) The quantity of strawberries Bulgaria will export at this subsidy rate c) The new price of strawberries in the rest of the world d) Draw the export supply and import demand diagram depicting the equilibrium conditions before and after the subsidy. e) The quantity of strawberries demanded in Bulgaria at the subsidy-ridden price f) The quantity of strawberries supplied by Bulgaria at the subsidy-ridden price
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$$S = D$$ $$60 - 7P = 3000 - P$$ $$6P = 2940$$ $$P = 490$$ This is the equilibrium price in Bulgaria. Show more…
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