6. The US has imposed protectionist policies for a variety of products, including steel. Suppose that US

demand for steel is given by P = 12 - (1/12)*Q and US supply is given by P = (1/6)*Q. Suppose that RoW

(rest-of-world) demand for steel is given by P = 12 - (1/12)*Q and RoW supply of steel is given by P =

(1/18)*Q

a. Find equilibrium quantity, price, consumer surplus, and producer surplus in the US if the US

does not allow any trade.

b. Find equilibrium quantity, price, consumer surplus, and producer surplus in the US if the US

allows trade with RoW. How much does total surplus increase because of trade? (Hint: You need

to solve for aggregate demand and aggregate supply. This will first require transforming the

country-specific supply and demand functions into the form where Q is on one side of the

equation and everything else is on the other side.)

c. Based on your answer in (b), who in the US is more likely to support the transition to free

trade - consumers or producers?

d. Suppose instead that the US put a quota and only allowed the RoW to export only up to 18

units of steel to the US. What would be US equilibrium price, quantity, consumer surplus, and

producer surplus?