3. The world price of sugar is $.10 per lb., but import quotas raise the U.S. price to $.225 per lb. a. Compute the tariff equivalent of the quota (as a percent of the world price). b. Due to the high price of sugar in the U.S., high fructose corn sweetener emerges as an economic substitute for sugar. As a result it is expected that the demand for sugar will fall over time. From the perspective of the U.S. sugar industry, are they better off with tariff protection, or a quota which is equivalent today, but which stays fixed over time? Explain using a supply and demand diagram in your answer.
3. The world price of sugar is $.10 per lb., but import quotas raise the U.S. price to $.225 per lb. a. Compute the tariff equivalent of the quota (as a percent of the world price). b. Due to the high price of sugar in the U.S., high fructose corn sweetener emerges as an economic substitute for sugar. As a result it is expected that the demand for sugar will fall over time. From the perspective of the U.S. sugar industry, are they better off with tariff protection, or a quota which is equivalent today, but which stays fixed over time? Explain using a supply and demand diagram in your answer.
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter6: The Economics Of Political Action
Section: Chapter Questions
Problem 15CQ
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Question
![3. The world price of sugar is $.10 per lb., but import quotas raise the U.S. price to $.225 per lb.
a. Compute the tariff equivalent of the quota (as a percent of the world price).
b. Due to the high price of sugar in the U.S., high fructose corn sweetener emerges as an economic
substitute for sugar. As a result it is expected that the demand for sugar will fall over time. From the
perspective of the U.S. sugar industry, are they better off with tariff protection, or a quota which is
equivalent today, but which stays fixed over time? Explain using a supply and demand diagram in your
answer.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F828ce15e-5110-4547-95d6-c4d8b77d9cae%2F24ea0515-9773-4fde-8e11-d5fde5b9daa7%2F4up9by7_processed.png&w=3840&q=75)
Transcribed Image Text:3. The world price of sugar is $.10 per lb., but import quotas raise the U.S. price to $.225 per lb.
a. Compute the tariff equivalent of the quota (as a percent of the world price).
b. Due to the high price of sugar in the U.S., high fructose corn sweetener emerges as an economic
substitute for sugar. As a result it is expected that the demand for sugar will fall over time. From the
perspective of the U.S. sugar industry, are they better off with tariff protection, or a quota which is
equivalent today, but which stays fixed over time? Explain using a supply and demand diagram in your
answer.
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