3. The following diagram shows the domestic demand and supply curves for sunglasses. Assume that the...

 

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3. The following diagram shows the domestic demand and supply curves for sunglasses. Assume that the world price for sunglasses is $10 per unit. 60 55- 50 45- 40 35 30 25 20 15 10 5 200 400 Supply Dend 1000 Part 1: With no trade allowed, what are the equilibrium price and equilibrium quantity for sunglasses? Part 2: If the country allows free trade, (a) how many sunglasses will domestic consumers demand and how many sunglasses will domestic producers produce? (b) Will the country import or export sunglasses, and, if so, how many sunglasses will be imported/exported? (c) What is total surplus after trade is allowed? Part 3: Suppose there is concern about displaced domestic sunglass workers and some politicians have argued to impose a tariff such that all former domestic sunglass manufacturers will reopen. (a) Using a concept discussed in this unit, What is the name of the argument that supports imposing a tariff in this situation? (b) Suppose the country imposes a $5 per unit tariff. How many sunglasses will be imported after the tariff is imposed? (c) After the government imposes the tariff, what is government revenue, total surplus, and deadweight loss? (d) Identify the deadweight loss in the model. 3. The following diagram shows the domestic demand and supply curves for sunglasses. Assume that the world price for sunglasses is $10 per unit. 60 55- 50 45- 40 35 30 25 20 15 10 5 200 400 Supply Dend 1000 Part 1: With no trade allowed, what are the equilibrium price and equilibrium quantity for sunglasses? Part 2: If the country allows free trade, (a) how many sunglasses will domestic consumers demand and how many sunglasses will domestic producers produce? (b) Will the country import or export sunglasses, and, if so, how many sunglasses will be imported/exported? (c) What is total surplus after trade is allowed? Part 3: Suppose there is concern about displaced domestic sunglass workers and some politicians have argued to impose a tariff such that all former domestic sunglass manufacturers will reopen. (a) Using a concept discussed in this unit, What is the name of the argument that supports imposing a tariff in this situation? (b) Suppose the country imposes a $5 per unit tariff. How many sunglasses will be imported after the tariff is imposed? (c) After the government imposes the tariff, what is government revenue, total surplus, and deadweight loss? (d) Identify the deadweight loss in the model.

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Part 1 With no trade allowed the equilibrium price and equilibrium quantity for sunglasses can be determined by the intersection of the demand and sup... View the full answer