solution

 

Suppose the following table reflects the domestic supply and demand for compact disks (CDs):

(a) Graph these market conditions and identify

(i) The equilibrium price.

(ii) The equilibrium quantity.

(b) Now suppose that foreigners enter the market, offering to sell an unlimited supply of CDs for

$6 apiece. Illustrate and identify

(i) The new market price.

(ii) Domestic consumption.

(iii) Domestic production.

(c) If a tariff of $2 per CD is imposed, what will happen to

(i) The market price?

(ii) Domestic consumption?

(iii) Domestic production?

Graph your answers.