7. Effects of a tariff in a large nation The following graph shows the domestic market for steel in the United States, where Sp is the domestic supply curve, and Dp is the domestic demand curve. Assume the United States is considered a large nation, meaning that changes in the quantity of its imports due to a tariff influence the world price of steel. Under free trade, the United States faced a total supply schedule of Sp+w, which shows the quantity of steel that both domestic and foreign producers together offer domestic consumers. In this case, the free-trade equilibrium (black plus) occurs at a price of $210 per ton of steel and a quantity of 16 million tons. At this price, the United States imports 12 million tons of steel. Suppose the U.S. government imposes a $75-per-ton tariff on steel imports. On the following graph, use the tan line (rectangle symbol) to draw the new total supply schedule including the tariff (SD+w+T). Then use the grey point (star symbol) to indicate the new market equilibrium price and quantity as a result of the tariff. ? 420 T DD

7. Effects of a tariff in a large nation The following graph shows the domestic market for steel in the United States, where Sp is the domestic supply curve, and Dp is the domestic demand curve. Assume the United States is considered a large nation, meaning that changes in the quantity of its imports due to a tariff influence the world price of steel. Under free trade, the United States faced a total supply schedule of Sp+w, which shows the quantity of steel that both domestic and foreign producers together offer domestic consumers. In this case, the free-trade equilibrium (black plus) occurs at a price of $210 per ton of steel and a quantity of 16 million tons. At this price, the United States imports 12 million tons of steel. Suppose the U.S. government imposes a $75-per-ton tariff on steel imports. On the following graph, use the tan line (rectangle symbol) to draw the new total supply schedule including the tariff (SD+w+T). Then use the grey point (star symbol) to indicate the new market equilibrium price and quantity as a result of the tariff. ? 420 T DD

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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