Once again, assume the set-up of Problen Set 1 where the domestic supply (Qs) an

Question

Once again, assume the set-up of Problen Set 1 where the domestic supply (Qs) and demand (Qd) for computers in the United States are given by the following equations: a745 10P However, now assume the world price is $60 (such that the US exports computers) 1. Solve for the free-trade equilibrum and illustrate your answers by labeling a supply/demand graph of the computers market in the United States. That is, solve for: (a) The price of computers in the United States. (b) The quantity of computers produced (Q) and sold (Qd) in the United States. (c) The consumer and producer surplus in the computer market in the United States. 2. Now assume the US (a small country) imposes an export subsidy of $4 per computer. Under the export subsidy regime, solve for the new equilibrium and, once again, illustrate your answers by labeling a supply/demand graph of the computer market in the United States. That is, solve for: (a) The price of computers in the United States. (b) The quantity of computers produced(Q.) and sold (QD) in the United States. (c) The consumer and producer surplus in the computer market in the United States. (d) The change in government revenue from subsidizing exports.

Explanation / Answer

1) a) Qd= Qs

745 -10P = -5 + 5P

750= 15P

P= 50.

So the price of computers is $50 in United States.

B) Qd= 745-500

Qd= 245

Qs= 245

C) Consumer surplus = 1/2 *(74.5-50)*245

Cs= $3001.25

PS= 1/2*(50-1)*245

PS= $6002.5

2) please upload it again. It against chegg policy.

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