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Suppose 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). Please regard phones as a homogenous product. Prices are all in dollar terms.

a. Assuming no trade what would be the equilibrium price and quantity with a 100 per phone tax? What would be the tax revenue? What would be the effect on producer profits?

b. Assume now that there is free trade (in both directions) between the two countries (and no transportation cost). Please find the equilibrium prices and quantities for phones in the US and Korea.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91276094

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