1.4.2 The following graph represents the domestic supply and demand for coal.

a. In the absence of trade, what is the equilibrium price and equilibrium quantity?

b. The government opens the market to free trade, and Indonesia enters the market, pricing coal at $40 per ton.

What will happen to the domestic price of coal? What will be the new domestic quantity supplied and domestic quantity demanded? How much coal will be imported from Indonesia?

c. After numerous complaints from domestic coal producers, the government imposes a $10 per ton tariff on all imported coal. What will happen to the domestic price of coal? What will be the new domestic quantity supplied and domestic quantity demanded? How much coal will now be imported from Indonesia?

d. How much revenue will the government receive from the

$10 per ton tariff?

e. Who ultimately ends up paying the $10 per ton tariff?

Why?

Transcribed Image Text:

$100 Price per ton 555 50 40 D 0 75 150 180 240 340 450 Millions of tons S