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Consider France, a small country, that imports laptops from the United States (U.S.) and China. You are given the following information about the laptop market

Consider France, a small country, that imports laptops from the United States (U.S.) and China. You are given the following information about the laptop market in France under international trade (just a heads up: this question is going to be about a discriminatory tariff):

  • The world price is equal to $500.
  • Domestic demand for laptops at the world price: 2000 units.
  • Domestic supply of laptops at the world price: 300 units.
  • Imports from the US at the world price: 300 units.

a. (6 points) Using the information provided, draw a graph representing the laptop market in France. You should include both a domestic supply curve and a supply curve that combines the domestic supply with imports from the United States. The two supply curves should share the same y-intercept. Label all the relevant points defined above.

b. (2 points) Calculate the number of imports from China at the world price. Label it on your graph.

c. (1 point) France decides to impose a $50 tariff on laptop imports from China, but not from the US. Draw this tariff on your graph. You do not need to show the effect on anything except the world price.

d. (3 points) Below your graph, indicate (with arrows or a short statement) what will happen to each of the following values: the domestic supply, imports from the U.S., imports from China. No numbers are necessary.

e. (3 points) Label the area on your graph that represents the revenue from this tariff.

international trading

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