Compute the equilibrium price of spark plugs in the us

Assignment Help Business Management
Reference no: EM131376511

The demand for spark plugs in the United States is given by Q= 100-P, where Q indicates the number of spark plugs purchased and P is the price. Suppose that there are no spark plugs produced in the U.S., but they can be imported from either Mexico or the rest of the world (ROW).The price of spark plugs in Mexico is $20, and the price from the lowest cost supplier is $10. In each case, spark plugs are produced with a horizontal supply curve, so that these prices are fixed and will not change with changes in the U.S. policy. The U.S. tariff on spark plugs is a specific tariff in the amount of $15 per unit imported.

1. If there is no free trade agreement between any countries, so that every country must pay the same tariff, from where will U.S. consumers import their spark plugs: Mexico orROW? Compute the equilibrium price of spark plugs in the U.S., the quantity imported and consumed, and the U.S. consumer surplus and tariff revenue.

2. Now, suppose the US signs a free trade agreement with Mexico that eliminates the tariff on spark plugs from Mexico, but leaves the tariff on sparks plugs from ROW unchanged.How will the equilibrium change? Answer the same questions as in the previous question under this new policy regime.

3. Identify the welfare change due to trade creation, and the welfare change due to trade diversion. Does the free trade agreement raise or lower U.S. welfare?

4. Now, how would your answer to question (7) change if the tariff had been $50? Explain without the need for additional calculations.

5. Now, how would your answer change if the tariff had been $5? No calculation is needed.

Reference no: EM131376511

Questions Cloud

What are the main features of the dual-coding hypothesis : What are the main features of (a) the dual-coding hypothesis, (b) the conceptual-propositional hypothesis, and (c) the functional-equivalency hypothesis
Actions policymakers in the country : Ground your arguments in part on economic variables discussed in Module 1. Describe what actions policymakers in the country are likely to take and/or should take in the future to continue their growth and economic success.
Consistent with profit-maximization : Management charges higher nightly rates in the winter, when its average occupancy rate is 75 percent, than in the summer, when its occupancy rate is 85 percent. Can this policy be consistent with profit-maximization? Explain.
How can consciousness be studies scientifically : How can consciousness be studies scientifically? Describe the stages of sleep
Compute the equilibrium price of spark plugs in the us : If there is no free trade agreement between any countries, so that every country must pay the same tariff, from where will U.S. consumers import their spark plugs: Mexico orROW? Compute the equilibrium price of spark plugs in the U.S., the quantit..
What makes working for google so great you may ask : For the past couple of years Google has been reported being the number one company to work for in Fortune magazine. What makes working for Google so great you may ask?
Summary of the major issues facing the client : A summary of the major issues facing the client needing to be addressed. A working diagnosis for the client (with diagnostic summary and rationale) utilizing the following information from the CAGE screening tool and case history information
Determining the first wave of globalization : Define the two waves of globalization. List at least three factors that played a key role in determining the first wave of globalization.
Degree of financial market integration : Describe two ways in which economists measure the degree of financial market integration (provide a brief explanation for their use).

Reviews

Write a Review

 

Business Management Questions & Answers

  International management managing across borders and culture

How does one successfully select an expatriate and In selecting a person for an expatriate assignment, what are the three major global mind-set attributes that successful expatriates possess?

  Dollar over that five-year period

According to the short-run model presented in KOM Chapter 15, would you expect the Australian dollar (A$) to have appreciated or depreciated vis-à-vis the U.S. dollar over that five-year period? Why? What actually happened?

  Impact on real estate

BUSN - Assignment choose a real estate finance topic identified in the text book or another topic relative to this course which has the potential to impact the buying, selling and finance of real estate.

  Identify accomplishments and achievements

Identify accomplishments and achievements rather than simply describe

  Where do you see this happening within the business world

Where do you see this happening within the business world?

  Structural configurations for organizations

Assignment: Discussion-Structural Configurations for Organizations Henry Mintzberg (1980) introduced a new way to explain structural configurations by "clustering various functions into groupings and showing their relative size and clout in respons..

  What are some key elements of a risk management plan

BUSN222 D001 -  Retail Property - Assume you are the Property Manager for a large mixed use commercial office building complex with residential, retail and office space.

  The employees of matrix''s client

1. How well did Matrix's client handle this situation?

  Food and beverage management teamwork with diverse

food and beverage management teamwork with diverse cultures1. every operation talks about team work and in theory it

  Manage the issues of converting

What was the conversion process followed by Google? How did Google manage the issues of converting from a group of proprietors to investors with an executive team including a formalized operational strategy and concerns for public image?

  Selling price of the bond

Heww Inc., issued a $50,000, 10 year bond with a stated interest rate of 6%. Assume interest payments are made semi-annually. What is the selling price of the bond if the market rate of interest is 5%? (Round to the nearest dollar.)

  Main concept introduced in the chapter

For this assignment student are to choose a chapter from the textbook and interpret, and explain the main concept introduced in the chapter. The course paper must include some current event to support the theory introduced in the chapter.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd