Scenario 2.2 Suppose the domestic supply(Qs) and demand(Qd) for MP3 players in t

Question

Scenario 2.2 Suppose the domestic supply(Qs) and demand(Qd) for MP3 players in the UNited States are given by the folowing 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 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 proce 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 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 abscence 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 trafe and the international price for MP3 platers settles at $50.

a. increase; $2, 625 b. increase $6,000 c. Decrease; $7,150 d. Decrease; $13,500

Explanation / Answer

3) When price is $ 50 then the quantity produced in US = -25 + 10*50 = 475 (c)

4) when price is $ 50 then the quantity demanded in US = 875 - 5*50 = 625 (d)

5) import = demand - production = 625 - 475 = 150 (a)

6) consumer surplus is the willingness to pay for the consumer. the consumer can pay a maximum price of $ 175. ( Qd=0 : 875 = 5p)

consumer surplus = 0.5 * 575 * (175 - 60) (area of the triangle) = $33062.50 (c)

7) after trade consumer surplus = 0.5 * 625 * (175 - 50) = $ 39062.50

thus the consumer surplus increases after trade by $39062.50 - 33062..50 = $ 6000 (b)

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.