In the country of Alpha, -shirts are sold domestically in a competitive market, the equilibrium price is $10, and the equilibrium quantity is 100.
(a) Draw a correctly labeled demand and supply graph for the domestic -shirt market in Alpha. Plot the numbers on the graph.
(b) Assume the world price of -shirts is $6, and Alpha engages in international trade.
(i) Will Alpha be an exporter or importer of -shirts? Explain.
(ii) On your graph in part (a), indicate the domestic quantity demanded of -shirts at the world price and label it . (iii) On your graph in part (a), indicate the change in the consumer surplus, shaded completely.
(c) Suppose the government of Alpha imposes a tariff of $2 on -shirts. On your graph in part (a), indicate the new domestic quantity supplied of -shirts as a result of the tariff and label it .