Steel is produced only in the US and the rest of the world (ROW). The inverse demand and supply in the US are p = 110 - Q8 and p = 20 + Qi, while in the ROW, they are p = 70 - Qg and p = QR. All quantities are in millions of tons and all prices are in dollars per ton. Since steel is produced more cheaply in the ROW, the US imports it from the ROW under international trade. At any price, p, the imports of the Us, QM, is the excess demand for steel given by the difference between the quantity demanded and the quantity supplied domestically in the US: QM = Q8 - Qủ. Similarly, the exports of the ROw, QE, is the excess supply of steel given by the difference between how much they produce and how much they demand: QE = Qk - Q%.
Steel is produced only in the US and the rest of the world (ROW). The inverse demand and supply in the US are p = 110 - Q8 and p = 20 + Qi, while in the ROW, they are p = 70 - Qg and p = QR. All quantities are in millions of tons and all prices are in dollars per ton. Since steel is produced more cheaply in the ROW, the US imports it from the ROW under international trade. At any price, p, the imports of the Us, QM, is the excess demand for steel given by the difference between the quantity demanded and the quantity supplied domestically in the US: QM = Q8 - Qủ. Similarly, the exports of the ROw, QE, is the excess supply of steel given by the difference between how much they produce and how much they demand: QE = Qk - Q%.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter6: Managing In The Global Economy
Section: Chapter Questions
Problem 9E
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Question
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Transcribed Image Text:(b) Find the consumer and producer surplus in the US at the price p*.
consumer surplus
$
million
producer surplus
$
million
(c) The US government imposes a tax of $12 per unit on the ROW's exports. Find the new world equilibrium price, p**, and new world equilibrium quantity traded, Q**.
p** = $
per ton
Q** =
million tons
What are the new quantities sold in each market, in the US and the ROW?
US
million tons
ROW
million tons
(d) What is the tax incidence on buyers and sellers in the US? What is the tax incidence on buyers and sellers in the ROW? Explain briefly.
US buyers pay $
per ton, $
per ton more than before. US sellers receive $
per ton, $
per ton more
than before. The ROW sellers receive $
per ton less the tax of $12, i.e., $
per ton, which is $
per ton less than before.
The ROW buyers pay $
per ton, which is $
per ton less than before.
(e) Find the new consumer and producer surplus in the US at the price p** and the tax revenue earned by the US government.
consumer surplus
$
million
producer surplus
$
million
US tax revenue
2$
million

Transcribed Image Text:Steel is produced only in the US and the rest of the world (ROW). The inverse demand and supply in the US are
p = 110 - Q9 and
p = 20 + Qi,
while in the ROw, they are
p = 70 - Q% and
p = QR.
All quantities are in millions of tons and all prices are in dollars per ton. Since steel is produced more cheaply in the ROW, the US imports it from the ROW under international trade. At
any price, p, the imports of the US, QM, is the excess demand for steel given by the difference between the quantity demanded and the quantity supplied domestically in the US:
QM = Q8 - Qi. Similarly, the exports of the ROW, QE, is the excess supply of steel given by the difference between how much they produce and how much they demand:
QE = Q2 - Qg.
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