Since 1981, the U.S. government has supported the U.S. price of sugar by limiting import of sugar into the United States. Restricting imports is effective because the United States consumes more sugar than it produces.
a. Using supply/demand analysis, demonstrate how import restrictions increase the price of domestic sugar.
b. What other import policy could the government implement to have the same effect as the import restriction?
c. Under the Uruguay Round of the General Agreement on Tariffs and Trade, the United States agreed to permit at least 1.25 million tons of sugar to be imported into the United States. How does this affect the U.S. sugar price support program?