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1. (20 points) Assume two countries, the U.S (US) and Japan ()), have one good: cars. The demand (d) and supply (s) functions for cars
1. (20 points) Assume two countries, the U.S (US) and Japan ()), have one good: cars. The demand (d) and supply (s) functions for cars in the U.S. and Japan are described by the following functions: Qd' = 30 - 2' Qs! = -4+P Qdus = 40 - P QsUS = -10 + 2P P is the price measured in a common currency used in both countries, such as the U.S. dollar. a. Compute the equilibrium price (P) and quantities (Q) in each country without trade (10 points). b. Now assume that free trade occurs. The free-trade price goes to 50 U.S. dollars. Who exports and imports cars and in what quantities? (10 points) 2. (5 points) You have the responsibility of managing trade policy in Jamaica. The Jamaican export market for coffee is new and developing, i.e., Jamaica coffee is an infant industry. Jamaica coffee producers are requesting tariff protection from cheap Brazilian coffee. What types of policies will you enact? Explain. 3. (5 points) Does international trade, taken as a whole, increase the total number of jobs, decrease the total number of jobs, or leave the total number of jobs about the same? Hint: Provide your answer (with reasoning) based on what you expect under the partial equilibrium model for the exporting country, the importing country, and the net overall effect on the world
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