Question: Competitive firms located in Lesotho (Africa) sell their tube socks only in Europe and theUnited States (which do not produce the good themselves). The industry's supply curve isupward sloping.
a. Show the initial U.S., European, and total equilibrium quantities and price(s). (Hint: Use amultimarket equilibrium analysis.)
b. Now Europe puts a tariff of t per unit on the good but the United States does not. What is the effect of the tariff on the U.S., European, and total quantities and price(s)?