Assume that the U.S. the demand for phones is given by P=700-Q that the supply is given by P=200+Q. In Korea suppose the demand is given by P=600-Q and supply is given by P=50 + (Q/2).
a. Assuming that there is no trade between countries, identify the equilibrium prices and thr quantities for autos in U.S. and Korea.
b. Assuming no trade what would be the equilibrium price and quantity with a 100 per phone tax? What would be the effect on producer profits? What would be the tax revenue?
Suppose now that there is free trade among the two countries (and no transportation cost). Identify the equilibrium prices and the quantities for phones in the US and Korea.
c. Discuss how much do U.S. consumers gain from free trade?
Discuss how much of this gain is due to U.S. buyers who buy a phone with free trade but did not purchase a phone without free trade?
4. Assume the U.S. phone makers lobby for a tariff on the Korean phones. Determine the smallest tariff that would cause Korean phone makers to stop selling their phones in the US?