# Kingston Technology, an American company, manufactures 24 thousand 4GB RAM sticks for the domestic market at the price of \$18 for each stick. After a trade agreement between the US and China, the company started to export some of its sticks to China

Kingston Technology, an American company, manufactures 24 thousand 4GB RAM sticks for the domestic market at the price of \$18 for each stick. After a trade agreement between the US and China, the company started to export some of its sticks to China. Production increased by an additional 4 thousand sticks and Kingston raised the price of each stick to \$21 while domestic demand was reduced by 6 thousand sticks as a result. a. Identify the supply and demand function curve for 4GB RAM sticks. (2pt) b. After a certain time, China has been accused of foul play. Kingston strongly believed its partner in China engaged in Intellectual Property theft to undercut competition and demanded the U.S. government take action. Export subsidies for Kingston were quick to be provided to ensure fair competition. With a new influx of funding, the new production of RAM sticks rose to 36 thousand sticks. Determine the value of the consumption effect, production effect, trade effect, and subsidy value. (2pt) c. Calculate the deadweight loss of subsidy. (3pt) d. Is U.S. government interference in free trade justified in this case? Provide a brief argument (no more than 150 words)
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## 3 replies

2 months ago
a. Supply and demand function curve for 4GB RAM sticks:
Supply Function: Initially, with domestic production only, the supply function is represented by S1: Quantity Supplied = 24,000 sticks. Demand Function: Initially, with domestic demand only, the demand function is represented by D1: Quantity Demanded = Quantity Supplied = 24,000 sticks.
b. With the changes: Supply Function: After the increase in production and price, the new supply function is represented by S2: Quantity Supplied = 28,000 + 4,000 = 32,000 sticks. Demand Function: After the decrease in domestic demand, the new demand function is represented by D2: Quantity Demanded = 24,000 - 6,000 = 18,000 sticks.
c. The calculation of the various effects and subsidy value would depend on the specific values provided for the consumption effect, production effect, trade effect, and subsidy value.
d. Justification of U.S. government interference in free trade: Given the allegations of Intellectual Property theft, the U.S. government's intervention can be justified as it aims to protect the interests of American companies and ensure fair competition. Intellectual Property theft undermines innovation and competitiveness, harming not only individual companies but also the economy as a whole. By providing export subsidies, the government is mitigating the unfair advantage gained by the alleged foul play, fostering a level playing field for businesses. Therefore, in this case, U.S. government interference in free trade can be seen as justified to uphold the principles of fair competition and protect American interests.
2 months ago
a. Supply and demand function curve for 4GB RAM sticks:
Supply Function: Initially, with domestic production only, the supply function is represented by S1: Quantity Supplied = 24,000 sticks. Demand Function: Initially, with domestic demand only, the demand function is represented by D1: Quantity Demanded = Quantity Supplied = 24,000 sticks.
b. With the changes: Supply Function: After the increase in production and price, the new supply function is represented by S2: Quantity Supplied = 28,000 + 4,000 = 32,000 sticks. Demand Function: After the decrease in domestic demand, the new demand function is represented by D2: Quantity Demanded = 24,000 - 6,000 = 18,000 sticks.
c. The calculation of the various effects and subsidy value would depend on the specific values provided for the consumption effect, production effect, trade effect, and subsidy value.
d. Justification of U.S. government interference in free trade: Given the allegations of Intellectual Property theft, the U.S. government's intervention can be justified as it aims to protect the interests of American companies and ensure fair competition. Intellectual Property theft undermines innovation and competitiveness, harming not only individual companies but also the economy as a whole. By providing export subsidies, the government is mitigating the unfair advantage gained by the alleged foul play, fostering a level playing field for businesses. Therefore, in this case, U.S. government interference in free trade can be seen as justified to uphold the principles of fair competition and protect American interests.