Question 4 Use the following graph to answer the next six questions. 325 275 225 Price of 175 TVs ($) 125 75 25 Domestic supply World price 20 40 60 80 100 120 Quantity of TVs (thousands) Domestic demand If this economy trades freely with other countries, without tariffs, what will the price of a TV be if they decide to participate in international trade? a. $225 b. $175 c. $75 d. $125 e. $275
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Scenario 2.2: Suppose the domestic supply (Qs) and demand (Qd) for MP3 players in the United States are given by the following set of equations. Qs = -25 + 10p Qd = 875 - 5p 1. Refer to scenario 2.2. In the absence of international trade in MP3 players, what will be the price of MP3 players in the United States? a. $60 b. $65 c. $90 d. $70 2. In the absence of international trade in MP3 players, how many MP3 players will be sold in the United States? a. 825 b. 575 c. 608 d. 925 3. If the United States can import MP3 players from the rest of the world at a per unit price of $50, how many MP3 players will be produced in the United States? a. 625 b. 475 c. 925 d. 525 4. If the United States can import MP3 players from the rest of the world at a per unit price of $50, what will be the total demand for MP3 players in the United States? a. 625 b. 475 c. 925 d. 550 5. If the U.S engages in free trade and the international price of MP3 players is $50, it would import ____ MP3 players from the rest of the world. a. 150 b. 250 c. 475 d. 225 6. In the absence of trade with the rest of the world, the consumer surplus in the United States MP3 player market is ___. a. $22,562.50 b. $30,062.50 c. $33,062.50 d. $19,500.00 7. The consumer surplus will _____ by ______ when the United States engages in international trade and the international price for MP3 players settles at $50. a. increase; $2,625 b. increase $6,000 c. decrease; $7,150 d. decrease; $13,500
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Akash M.
Assume the United States is an importer of televisions and there are no trade restrictions. U.S. consumers buy 1 million televisions per year, of which 400,000 are produced domestically and 600,000 are imported. a. Suppose that a technological advance among Japanese television manufacturers causes the world price of televisions to fall by \$100. Draw a graph to show how this change affects the welfare of U.S. consumers and U.S. producers and how it affects total surplus in the United States. b. After the fall in price, consumers buy 1.2 million televisions, of which 200,000 are produced domestically and 1 million are imported. Calculate the change in consumer surplus, producer surplus, and total surplus from the price reduction. c. If the government responded by putting a \$100 tariff on imported televisions, what would this do? Calculate the revenue that would be raised and the deadweight loss. Would it be a good policy from the standpoint of U.S. welfare? Who might support the policy? d. Suppose that the fall in price is attributable not to technological advance but to a \$100 per television subsidy from the Japanese government to Japanese industry. How would this affect your analysis?
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