9.10. The domestic demand for portable radios is given by Demand: Q = 5,000-100P where price P is measured in dollars and quantity Q is measured in thousands of radios per year. The domes tic supply...

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9.10. The domestic demand for portable radios is given by Demand: Q = 5,000-100P where price P is measured in dollars and qua

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Answer 1

Answer #1

Demand: Q=5000-100P

Supply: Q=150P

a) Setting Demand = Supply

5000-100P=150P

5000=150P+100P

5000=250P

Equilibrium Price=5000/250 = 20

Equilibrium Quantity = 5000-100(20) = 3000

b) When the world price is 10

Quantity produced domestically = 150(10) = 1500

Quantity demanded domestically = 5000-100(10) = 4000

Imports = 4000-1500 = 2500

c) With the tariff of $5, the price increases to 15

The quantity demanded decreases to 3500

The quantity supplied increases to 2200

Tariff revenue = (3500-2200)*5 = 6500

CS transferred to producers = 1500*5+0.5*700*5 = 7500+1750 = 9250

DWL = 0.5*(2200-1500)*5+0.5*(4000-3500)*5 = 1750+1250 = 3000

d)

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9.10. The domestic demand for portable radios is given by Demand: Q = 5,000-100P where price P is measured in dollars and quantity Q is measured in thousands of radios per year. The domes tic supply...