Suppose the domestic supply (Qs) and demand (Qd) for MP3 players in the U.S. are

Question

Suppose the domestic supply (Qs) and demand (Qd) for MP3 players in the U.S. are given by the set of equations that follows:

    P = 2.5 + 0.1Qs                               P = 175 – 0.2Qd

In the absence of international trade in MP3 players (autarky), the price of MP3 is $60. How many MP3 players will be produced (supplied) and demanded in the United States?

If the U.S. 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 U.S.?

If the U.S. 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?

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.

**** Net gain for the United States after trade is ________.

Explanation / Answer

Answer:- in autarky at price $60, 575 units of MP3 players will be produced (supplied) and demanded in the United States.

If the U.S. can import MP3 players from the rest of the world at a per unit price of $50, only 475 units of MP3 players will be produced in the U.S.

If the U.S. can import MP3 players from the rest of the world at a per unit price of $50, 675 units will be the total demand of MP3 players in the united states.

If the U.S. engages in free trade and the international price of MP3 players is $50,it would inport 200 units of  MP3 players from the rest of the world.

Net gain for the United States after trade is 667 .

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