The USA imports 380,000 units of cellphones from China, and locally the USA produces 120,000 units. The world price for cellphones is $300 per unit. The USA is a large country and imposed a tariff of 25% for the importation of cellphones from China as a retaliation due to its trade imbalance with China. Due to the tariff, the world price falls by 10%, local production increases by 80% and local consumption falls by 20%. (a) Solve for the price after the tariff was imposed, and quantity of cellphones produced, consumed and imported in the USA. Show your answers with a proper diagram of the cellphones market. (b) Explain the effects on the consumer surplus, producer surplus, deadweight loss and terms of trade of the cellphones market in the USA after the tariff was imposed. Explain the welfare effects of both countries.
The USA imports 380,000 units of cellphones from China, and locally the USA produces 120,000 units. The world
(a) Solve for the price after the tariff was imposed, and quantity of cellphones produced, consumed and imported in the USA. Show your answers with a proper diagram of the cellphones market.
(b) Explain the effects on the
Step by step
Solved in 3 steps with 1 images
