Question

1.

Figure 9-26 The diagram below illustrates the market for baseballs in the U.S. Price mestic Supply World Pride Domestk Demand 25015007 50 1000 1250 1500 Quantity of Baseballs Refer to figure 9-26. The figure shows that a. the U.S. will import baseballs when the market opens to international trade. b. the U.S. will export baseballs when the market opens to international trade. c. the U.S. will be a net loser when the market for baseballs opens to international trade. d. if the U.S. opens its baseball market to international trade, the price will plummet.

2.

Answer 1

Q1

Answer

Option b

The world price is above the equilibrium price in the country so the US export when open to trade and the domestic prices increases to the world price.

P=14 and Qd=300 and Qs=900

Export =Qs-Qd=900-300=600 units

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Q2

Answer

Option c

The tariff increases the domestic price which increases domestic supply and decreases domestic demand so the deadweight loss is equal to the two triangle

DWL=0.5 * tariff * change in Qd +0.5* tariff *change in Qs