The US-China tariff war (12 points) Suppose a two-country setting with one goods notebook. Consider the United States’ d

[answerhappygod]

The US-China tariff war (12 points) Suppose a two-country
setting with one goods notebook. Consider the United States’ demand
curve for notebooks is 𝐷 = 150 − 10𝑃. and its supply curve is 𝑆 =
30 + 10𝑃. The US also imports notebooks from China, and China’s
export supply for the US is given by: 𝑋𝑆 = −60 + 20𝑃
(a) If notebooks can be exported freely into the United States,
find and plot the equilibrium under free trade. What is the world
price of a notebook? What is the volume of trade?
(b) Due to the trade war between China and the U.S, suppose the
US government imposes 25% tariffs on imports of notebooks.
i) Determine and plot the effect of the ad valorem import tariff
on the following: (1) the price of each country; (2) the quantity
of notebooks supplied and demand in the U.S.; (3) the volume of
trade. (3 points)
ii) Determine the effect of the tariff on the welfare of each of
the following groups (please calculate the exact number): (1) the
change of the US producers’ surplus; (2) the change of US
consumers’ surplus; (3) the US government’s revenue. (3 points)
iii) What is the net gain and the source for the US? (1 points)
(iv) In reality, Chinese exporters did not lower their export
prices to the US, and thus the gains from the terms of trade for
the US are close to zero. But why did the US government increase
its import tariffs during 2018-2019?