3. Consider the following diagram of the market for cars in China. Suppose that the importation...
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3. Consider the following diagram of the market for cars in China. Suppose that the importation of cars were banned in China, and as a result the equilibrium price of cars in China rose from $30,000 to $35,000 as shown below: P $45,000 a. $35,000 $30,000 1 1 T i I I I T 1 140.000 1 I I Domestic Supply World Supply Domestic Demand 70,000 210,000 What was consumer surplus when car imports were permitted? b. What has happened (in dollar terms) to consumer surplus when the importation of cars was banned? Q of midsized cars c. How will the number of cars produced by domestic companies change? d. Calculate the dollar value of the surplus that will shift from consumers to producers when imports are banned. 4. Draw a demand and supply diagram illustrating the market for Japanese Yen (). Use the diagram to show what happens to the $/ exchange rate when the income of American demanders of Yamaha motorcycles (made in Japan) decreases. Is this appreciation or a dep tion of the yen against the dollar? Explain. 3. Consider the following diagram of the market for cars in China. Suppose that the importation of cars were banned in China, and as a result the equilibrium price of cars in China rose from $30,000 to $35,000 as shown below: P $45,000 a. $35,000 $30,000 1 1 T i I I I T 1 140.000 1 I I Domestic Supply World Supply Domestic Demand 70,000 210,000 What was consumer surplus when car imports were permitted? b. What has happened (in dollar terms) to consumer surplus when the importation of cars was banned? Q of midsized cars c. How will the number of cars produced by domestic companies change? d. Calculate the dollar value of the surplus that will shift from consumers to producers when imports are banned. 4. Draw a demand and supply diagram illustrating the market for Japanese Yen (). Use the diagram to show what happens to the $/ exchange rate when the income of American demanders of Yamaha motorcycles (made in Japan) decreases. Is this appreciation or a dep tion of the yen against the dollar? Explain.
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