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EricNguyen

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Dec 8th 2012, 3:21:02

Domestic demand and supply for toothbrushes in Turkmenistan are as follows:

D: 4,369 - 43Q
S: 147 + 78Q

The USA is lower-cost producer of toothbrushes (at P=1019)

a. If Turkmenistan stops all imports, what is the equilibrium price and quantity of toothbrushes? Assuming free trade, what is the equilibrium quantity and price of toothbrushes in Turkmenistan (How many toothbrushes are imported from the USA & how many are sold by Turkmenistan producers?) Explain.

b. What if Turkmenistan places a tariff on USA's import (USA's supply curve accounting for the new tariff is now: P = 2552). How many toothbrushes does USA sell in Turkmenistan & how many toothbrushes do Turkmenistan producers sell in their domestic market? Explain.

c. Turkmenistan forums customs union with Yugoslavia (Turkmenistan's supply curve is P = 2036). As a result, how many toothbrushes do Turkmenistan producers now sell in their domestic market? How many toothbrushes are sold in Turkmenistan by producers in Yugoslavia? Explain.

d. What is the size & actual trade distortion & trade creation produced by this customs union in the market for toothbrushes? As a result of this customs union, what is the loss in revenue to Turkmenistan?

Thanks for the help!

Edited By: EricNguyen on Dec 13th 2012, 17:07:04
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