Use the following information to work Problems 1 to 8.

Wholesalers buy and sell roses in containers that hold 120 stems. The table provides information about the wholesale market for roses in the United States. The demand schedule is the wholesalers' demand and the supply schedule is the U.S. rose growers' supply.

Price

(Dollars per container)

Quantity Demanded

(millions of containers)

Quantity Supplied

(millions of containers)

100

15

0

125

12

2

150

9

4

175

6

6

200

3

8

225

0

10

Wholesalers can buy roses at world price at $125 per container.

Questions

1.Without international trade, what would be the price of a container of roses and how many containers of roses a year would be bought and sold in the United States?

2.At the price in your answer 1, does the United States or the rest of the world have a comparative advantage in producing roses?

3.If U.S. wholesalers buy roses at the lowest possible price, how many do they buy from U.S. growers and how many do they import?

4.Draw a graph to illustrate the U.S. wholesale market for roses. Show the equilibrium in that market with no international trade and the equilibrium with free trade. Mark the quantity of roses produced in the United States, the quantity imported, and the total quantity bought.

5.Explain who gains and loses from free International Trade in roses compared to a situation in which Americans buy only roses grown in United States.

6.Draw a graph to illustrate the gains and losses from free trade.

7.Calculate gains from trade.

8.If the United States puts a tariff of $25 per container, explain how the U.S. price of roses, the quantity of roses bought, the quantity produced in the U.S. and the quantity imported change? Who gains and who loses from this tariff.