Consider the domestic steel market. Under autarky, the domestic equilibrium is such that 8 million pounds of steel are produced and sold at a price of $12 per pound. International producers, generally, are able to produce at a lower cost than domestic producers. Under an open trade policy, the world price of $6 enters the domestic market as an exogenous variable. For the questions below, assume that the domestic market is beginning in the equilibrium that exists under an open trade policy and consider the impact of a $3 per pound tariff on imported steel. What is the gain in producer surplus from the tariff? $ (round your answer to two decimal palces) million. What import quota, Q, would produce the same gain in producer surplus as the tariff? Q = million pounds (enter your response as a whole number). What is the deadweight loss using a quota? $ million. (round your answer to two decimal places and enter it as a positive number) Price/pound 30- 27- 24- 21- 18- 15- N 12- 9- 6- 3- 0- 0 B F -~ Domestic Steel Market A C G D E 10 Millions of pounds H Sdomestic wp+tariff wp Ddomestic 12 14

Consider the domestic steel market. Under autarky, the domestic equilibrium is such that 8 million pounds of steel are produced and sold at a price of $12 per pound. International producers, generally, are able to produce at a lower cost than domestic producers. Under an open trade policy, the world price of $6 enters the domestic market as an exogenous variable. For the questions below, assume that the domestic market is beginning in the equilibrium that exists under an open trade policy and consider the impact of a $3 per pound tariff on imported steel. What is the gain in producer surplus from the tariff? $ (round your answer to two decimal palces) million. What import quota, Q, would produce the same gain in producer surplus as the tariff? Q = million pounds (enter your response as a whole number). What is the deadweight loss using a quota? $ million. (round your answer to two decimal places and enter it as a positive number) Price/pound 30- 27- 24- 21- 18- 15- N 12- 9- 6- 3- 0- 0 B F -~ Domestic Steel Market A C G D E 10 Millions of pounds H Sdomestic wp+tariff wp Ddomestic 12 14

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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