Question

Suppose that the world price of baseball caps is €2 and there are no import restrictions on this product. Assume that Spanish
consumers are indifferent between domestic and imported baseball caps.
Instructions: Enter your answers as whole numbers.
a. What quantity of baseball caps will domestic suppliers supply to domestic consumers?
thousand
b. What quantity of baseball caps will be imported?
thousand
Now suppose a tariff of C1 is levied against each imported baseball cap.
C. After the tariff is implemented, what quantity of baseball caps will domestic suppliers supply to domestic consumers?
thousand
d. After the tariff is implemented, what quantity of baseball caps will be imported?
thousand
No
Drov

Answer 1

Based on the supply and demand of the baseball caps, the relevant supply quantities are:

• a. 20,000 baseball caps.
• b. 60,000 baseball caps.
• c. 30,000 baseball caps.
• d. 40,000 baseball caps.

What quantity of baseball caps will be supplied domestically?

At the price of €2, the supply according to the graph is:

= 20,000 baseball caps.

What quantity will be imported?

The quantity imported is shown as:

= Demand at €2 - Domestic supply at €2

= 80 - 20

= 60,000 baseball caps

What quantity will be supplied domestically with the tariff?

A tariff of €1 would increase the price to €3.

At this price, the supply would be:
= 30,000 baseball caps.

What quantity will be imported with the tariff?

At the new price, the quantity imported is:

= Demand at €3 - Domestic supply at €3

= 70,000 - 30,000

= 40,000 baseball caps.

Find out more on supply and demand at https://brainly.com/question/516635.

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