Essentials of Economics 10th Edition by Bradley Schiller, Karen Gebhardt

Exercise 1

Suppose the following table reflects the domestic supply and demand for T-shirts:

( a ) Graph these market conditions and identify when there is an absence of trade (i) the market price, (ii) domestic consumption, and (iii) domestic production.
( b ) Now suppose that foreigners enter the market, offering to sell an unlimited supply of T-shirts for $7 apiece. Now with free trade, identify (i) the market price, (ii) domestic consumption, and (iii) domestic production.
( c ) If a tariff of $2 per T-shirt is imposed, with this trade barrier, identify (i) the market price, (ii) domestic consumption, and (iii) domestic production.