C.

Assume there are only two countries in the world - China and the United States, and that the
United States does not manufacture solar panels. The demand curves for solar panels in China
and the US, and (China’s) supply curve for solar panels are given by the following table.
Suppose that China’s government initially does not permit solar panels to be exported, but
subsequently agrees to allow the export. Assume that transporting solar panels to the US costs
nothing, that suppliers don’t care whether they sell to US or Chinese consumers. Answer the
following:

1. Before exports are permitted, what are the equilibrium price and quantity of solar panels
sold in China? Depict this equilibrium on a graph.

2. Does permitting exports shift the supply curve for solar panels? Why or why not? If so,
draw a new supply curve on the same graph.

XXX

3. Does permitting exports shift the demand curve for solar panels? Why or why not? If so,
draw a new demand curve on the same graph.

XXX

4. What is the new equilibrium price of a solar panel? How many solar panels are produced
when exports are permitted? Label these points on the graph.

XXX
5. How many Chinese panels do US consumers buy once trade is permitted? How many
panels do Chinese consumers buy? Label these quantities on your graph?

XXX

6. If you are a Chinese solar panel producer, do you like the decision to permit solar panels
to be exported? What if you are a Chinese solar panel consumer?

XXX

Price ($/ft2) Quantity Quantity Quantity Quantity

supplied demanded by demanded by Demanded by
(millions of ft2) Chinese US consumers US and Chinese
consumers (millions of ft2) Consumers
(millions of ft2) Together
(millions of ft2)

5 100 500 800

10 200 400 700

15 300 300 600

20 400 200 500

25 500 100 400

30 600 0 300