**Educational Text on U.S.-China Steel Trade**Consider a hypothetical example of trade in steel between the United States and China. For simplicity, assume that China is the only source of U.S. steel imports. The following graph shows the U.S. market for steel. Note that in the absence of any trade, the market price for steel in the United States is $500 per tonne, and the equilibrium quantity is 100 million tonnes per month.**Graph Explanation:**- The graph displays a standard supply and demand model for the U.S. steel market.- The x-axis represents the quantity of steel (in millions of tonnes per month).- The y-axis represents the price of steel (in dollars per tonne).- The blue line indicates Domestic Demand, showing an inverse relationship between price and quantity demanded.- The orange line indicates Domestic Supply, showing a direct relationship between price and quantity supplied.- The dashed black line represents the Free Trade Price, which is below $500 per tonne, indicating a lower price due to imports.**Symbols:**- Green Triangle: Represents U.S. consumer surplus under free trade with China.- Purple Diamond: Represents U.S. producer surplus under free trade with China.**Table Instructions:**Use the graph to complete the rows for the following table by indicating the quantity of steel supplied by U.S. producers, demanded by U.S. consumers, and imported from China under free trade.| | Quantity Supplied by U.S. Producers (Millions of tonnes of steel per month) | Quantity Demanded by U.S. Consumers (Millions of tonnes of steel per month) | Quantity Imported from China (Millions of tonnes of steel per month) ||-------------------------------------|-----------------------------------------------------------------------------|------------------------------------------------------------------------------|-----------------------------------------------------------------------|| **Free Trade** | | | || **Trade with Tariff** | | | | Suppose American steel manufacturers convince the U.S. government that Chinese firms are selling steel in the U.S. market at well below the cost of producing the steel, a practice known as dumping. In response to the accusations, the U.S. government puts a tariff of $100 per tonne on steel from China. The tariff increases the price of steel from $200 to $____ per tonne.Complete the second row of the previous table by indicating the quantity of steel supplied by U.S. producers, demanded by U.S. consumers, and imported from China in the presence of a $100-per-tonne tariff.On the following graph, use the black line (cross symbol) to indicate the domestic price of steel in the presence of a $100-per-tonne tariff. Then use the green area (triangle symbol) to shade the area that represents consumer surplus under the tariff, and use the purple area (diamond symbol) to shade the area that represents producer surplus under the tariff. Finally, use the grey rectangle (star symbols) to show the revenue that the U.S. government collects as a result of the tariff, and use the tan triangles (dash symbols) to show the deadweight loss (DWL) from the imposition of the tariff.### Graph Description:- **Axes**: - The horizontal axis shows "Quantity of Steel (Millions of tonnes per month)." - The vertical axis shows "Price (Dollars per tonne)."- **Lines**: - **Domestic Demand (Blue Line)**: Downward sloping. - **Domestic Supply (Orange Line)**: Upward sloping. - **Free Trade Price (Dashed Black Line)**: Indicates the original price without the tariff.- **Areas**: - **Price with Tariff (Cross Symbol)**: Indicated by a black line above the Free Trade Price. - **Consumer Surplus (Green Triangle)**: Area between the demand curve and the price with tariff. - **Producer Surplus (Purple Diamond)**: Area between the supply curve and the price with tariff. - **Tariff Revenue (Grey Stars)**: Rectangle between the domestic quantity and the imported quantity sold at the tariff price. - **DWL (Tan Dashes)**: Triangles representing loss from reduced trade after the tariff.### Question:**True or False**: According to this model, restricting trade using tariffs harms consumers but helps domestic producers.- ○ True

Consumer surplus is the area above market price and below the demand curve. Producer surplus is the…

Answered: Suppose American steel manufacturers…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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