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3 January, 11:44

Suppose portable radios can be imported at a world price of $10 per radio. If trade were unencumbered, what would the new market equilibrium be? How many portable radios would be produced domestically? How many portable radios would be imported?

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  1. 3 January, 12:10
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    Domestic demand: Q = 5,000 - 100P; Supply: Q = 150P

    At equilibrium, demand equals supply.

    5,000 - 100P = 150P

    250P = 5,000

    P = 5,000/250

    Equilibrium price (P) = $20

    Substituting P in demand equation:

    Q = 5,000 - (100*20)

    Equilibrium quantity (Q) = 3,000 portable radio would be imported
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