Reference no: EM132479833

The market for all-leather men's shoes is served by both domestic (US) and foreign (F) producers. The domestic produces have been complaining that foreign producers are dumping shoes onto the US market. As a result, Congress is very close to enacting a policy that would completely prohibit sales by foreign manufacturers of all-leather men's shoes in the US market. The demand curve and relevant supply curves are given by QD=50,000-250P, Qs^US=6000+70P, and Qs^F=2000+30P, where Qs^US is the quantity supplied by US producers in the US market and Qs^F is the quantity supplied by foreign producers in the US market.

i) Currently there are no restrictions covering all-leather men's shoes. What are the equilibrium price? What are the equilibrium quantities supplied by US firms and what are the equilibrium quantities supplied by the foreign firms?

ii) What price would prevail if the proposed policy were enacted? What are the equilibrium quantities supplied by US firms and what are the equilibrium quantities supplied by the foreign firms under this policy?

Now suppose that, instead of completely prohibiting sales by foreign manufacturers, Congress is considering enacting a tariff of 35 per unit imported (note: a tariff is a tax that the government imposes on imports).

iii) Calculate the equilibrium price and quantities that would prevail if the tariff were imposed.