1. Assume two countries, the U.S (US) and Japan (J), 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! = 60 – P 1 Qs' = -5 +P QduS = 80 – P 1 QsuS = -10 +P 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 b. Now assume that free trade occurs. The free-trade price goes to 56 U.S. dollars. Who exports and imports cars and in what quantities?

1. Assume two countries, the U.S (US) and Japan (J), 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! = 60 – P 1 Qs' = -5 +P QduS = 80 – P 1 QsuS = -10 +P 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 b. Now assume that free trade occurs. The free-trade price goes to 56 U.S. dollars. Who exports and imports cars and in what quantities?

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter9: Application: International Trade

Section: Chapter Questions

Problem 7PA

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