The United States has historically imposed import tariffs on goods that include tobacco, canned tuna, steel, and aluminum. Suppose the market for tobacco is illustrated by the accompanying graph. World price with tariff Domestic supply A G B E D World price P. 1 Domestic demand R U 3 6 7 Quantity (millions of pounds) (punod aad s) asud
The United States has historically imposed import tariffs on goods that include tobacco, canned tuna, steel, and aluminum. Suppose the market for tobacco is illustrated by the accompanying graph. World price with tariff Domestic supply A G B E D World price P. 1 Domestic demand R U 3 6 7 Quantity (millions of pounds) (punod aad s) asud
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter3: Demand And Supply
Section: Chapter Questions
Problem 6SCQ: A tariff is a tax on imported goods. Suppose the U.S. government cuts the tariff on imported flat...
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The United States has historically imposed import tariffs on goods that include tobacco, canned tuna, steel, and aluminum. Suppose the market for tobacco is illustrated by the accompanying graph.
a. As shown, the world price is $2 per pound. Suppose the U.S. imposes a tariff of $1 per pound. Adjust the price line labeled "World price with tariff" (at the top of the graph) to reflect this tariff.
b. Use the letters and values in the graph to fill in the following table.
Without tariff | With import tariff | |
---|---|---|
Price |
|
|
Quantity demanded |
|
|
Quantity supplied |
|
|
Domestic |
|
|
Domestic |
|
|
Government revenue |
|
|
Total economic surplus |
|
|
c. If the government decides to replace the tariff with a quota that will have the same effect on the market as the tariff, the quota should restrict imports to____________________( 1million pounds, 2 million pounds, 4 million pounds or 6 million pounds)
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