Mexico and the United States are the only producers and consumers of a certain type of electronic switch. The demand for and supply of the electronic switch in each country is given below.

Suppose there is free trade and that the exchange rate is 9.5 pesos to the dollar. What is the equilibrium price?
Which country will export the switches to the other country?
Suppose the U.S. imposes a tariff of $100 per switch. What will happen to imports and exports?
Suppose the exchange rate changes to 10 pesos to the dollar. How does that change answers to the previousquestions?

  • CreatedSeptember 27, 2014
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