Question
1. Suppose that the United States currently imports baseball bats without tariff, with the results shown in the first column of numbers below. Congress is
1. Suppose that the United States currently imports baseball bats without tariff, with the results shown in the first column of numbers below. Congress is thinking of imposing a tariff of $35 per bat and has asked you to estimate the gains and losses to different groups. You find that the $35 tariff would yield the prices and quantities shown in the right-hand column. In the following questions, explain your answers, and give numerical results if possible. Free-trade situation (no tariff) Situation with $35 tariff on bats U.S. domestic price of bats $80 $100 Tariff $0 $35 World price of bats $80 $65 U.S. production of bats per year 160,000 220,000 U.S. imports of bats per year 200,000 100,000 U.S. consumption of bats per year 360,000 320,000 a. What is the gain or loss to U.S. bat buyers from the tariff? b. What is the gain or loss to U.S. bat producers from the tariff? c. What is the government revenue from the tariff? d. What is the net gain or loss for the U.S. as a whole? e. What is the net gain or loss for other countries? f. What is the gain or loss for the world as a whole? g. Is the USA a large country for bats?
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