2. Years ago, an apple producer argued that the United States should enact a tariff, or a tariff, or a tax, on imports of bananas. His reasoning was that "the enormous imports of cheap bananas into the United States tend to curtails the domestic consumption of fresh fruits produced in the United States." (a) Was the apple producer assuming that apples and bananas are substitutes or complements? Briefly explain. (b) If a tariff on bananas acts as an increase in the cost of supplying bananas in the United States, use two demand and supply graphs to show the effects of the apple producer:s proposal. (i) One graph should show the effect on the banana market in the United States, and (ii) the other graph should show the effect on the apple market in the United States. Label the change in equilibrium price and quantity in each market and any shifts in the demand and supply curves.
2. Years ago, an apple producer argued that the United States should enact a tariff, or a tariff, or a tax, on imports of bananas. His reasoning was that "the enormous imports of cheap bananas into the United States tend to curtails the domestic consumption of fresh fruits produced in the United States." (a) Was the apple producer assuming that apples and bananas are substitutes or complements? Briefly explain. (b) If a tariff on bananas acts as an increase in the cost of supplying bananas in the United States, use two demand and supply graphs to show the effects of the apple producer:s proposal. (i) One graph should show the effect on the banana market in the United States, and (ii) the other graph should show the effect on the apple market in the United States. Label the change in equilibrium price and quantity in each market and any shifts in the demand and supply curves.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:2. Years ago, an apple producer argued that the United States should enact a tariff, or a
tariff, or a tax, on imports of bananas. His reasoning was that "the enormous imports of
cheap bananas into the United States tend to curtails the domestic consumption of fresh
fruits produced in the United States."
(a) Was the apple producer assuming that apples and bananas are substitutes or
complements? Briefly explain.
(b) If a tariff on bananas acts as an increase in the cost of supplying bananas in the
United States, use two demand and supply graphs to show the effects of the apple
producer's proposal. (i) One graph should show the effect on the banana market in
the United States, and (ii) the other graph should show the effect on the apple
market in the United States. Label the change in equilibrium price and quantity in
each market and any shifts in the demand and supply curves.
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