E
economics
Guest
6) Suppose that South Molucca is willing to supply any number of bird cages to Americans at a price of $60. American birdcage manufacturers have a supply curve given by QS = -30 + 2P. American consumers have a demand curve given by QD = 240 - P.
a) Explain why the market price for birdcages is $60. How many Birdcages do Americans buy at this price? How many are provided domestically and how many are imported from South Molucca? Calculate the total social surplus to Americans from this market? How is it distributed between consumers and producers?
b) Now suppose that a quota is enacted that permits the South Moluccans to sell only 45 birdcages per year in America. What is the price at which Americans want to import only 45 birdcages?
Explain why the price of the birdcages will rise to that level. Calculate the new social surplus to American producers and consumers. Which is greater - the amount that the winners win or the amount that the losers lose?
c) Suppose that the quota is abolished and replaced by a tariff that causes the number of imported birdcages to 45. Calculate the tariff revenue. Which Americans prefer the tariff to the quota, and which prefer the quota to the tariff?
a) Explain why the market price for birdcages is $60. How many Birdcages do Americans buy at this price? How many are provided domestically and how many are imported from South Molucca? Calculate the total social surplus to Americans from this market? How is it distributed between consumers and producers?
b) Now suppose that a quota is enacted that permits the South Moluccans to sell only 45 birdcages per year in America. What is the price at which Americans want to import only 45 birdcages?
Explain why the price of the birdcages will rise to that level. Calculate the new social surplus to American producers and consumers. Which is greater - the amount that the winners win or the amount that the losers lose?
c) Suppose that the quota is abolished and replaced by a tariff that causes the number of imported birdcages to 45. Calculate the tariff revenue. Which Americans prefer the tariff to the quota, and which prefer the quota to the tariff?