Suppose that the world price of a gallon of gasoline is $2.00 dollars per barrel and the US can buy all the gas it wants at this price. Suppose also that the demand and supply schedules for gasoline in the US are as follows: Price ($ per gallon) US Quantity demanded US quantity supplied $1.00 65 35 $1.50 60 40 $2.00 55 45 $2.50 50 50 $3.00 45 55 Draw the supply and demand curves for the US. With free trade in gasoline, what price will Americans pay for a gallon of gas? What quantity will Americans buy? How much of this will be supplied by American producers? How much will be imported? Illustrate total imports on your graph of the US gasoline market. Suppose the US imposes a $.50 tax per gallon on imported gas. What quantity would Americans buy? How much of this would be supplied by American producers? How much would be imported? Who is helped and who is hurt among the following groups: domestic consumers, domestic gasoline producers, the US government, foreign producers.

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter4: Demand, Supply, And Market Equilibrium

Section: Chapter Questions

Problem 21P

See similar textbooks

Related questions

Question

Suppose that the world price of a gallon of gasoline is $2.00 dollars per barrel and the US can buy all the gas it wants at this price. Suppose also that the demand and supply schedules for gasoline in the US are as follows:

Price ($ per gallon) US Quantity demanded US quantity supplied

$1.00 65 35

$1.50 60 40

$2.00 55 45

$2.50 50 50

$3.00 45 55

Draw the supply and demand curves for the US.
With free trade in gasoline, what price will Americans pay for a gallon of gas? What quantity will Americans buy? How much of this will be supplied by American producers? How much will be imported? Illustrate total imports on your graph of the US gasoline market.
Suppose the US imposes a $.50 tax per gallon on imported gas. What quantity would Americans buy? How much of this would be supplied by American producers? How much would be imported?
Who is helped and who is hurt among the following groups: domestic consumers, domestic gasoline producers, the US government, foreign producers.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 5 steps with 4 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions