Consider a hypothetical example of trade in steel between the United States and China. For simplicity, assume that China is the only source of U.S. steel imports. The following graph shows the U.S. market for steel. Note that in the absence of any trade, the market price for steel in the United States is $500 per tonne, and the equilibrium quantity is 100 million tonnes per month. Use the green area (triangle symbol) to show U.S. consumer surplus under free trade with China, and use the purple area (diamond symbol) to show U.S. producer surplus under free trade with China. 1000 -- Domestic Demand Domestic Supply A 900 800 Consumer Surplus 700 . 600 Producer Surplus 500 400 Free Trade Price 300 PRICE (Dollars per tonne) 200 100 0 -u l l l l l l | | l i 0 20 40 60 80 100 120 140 160 180 200 QUANTITY OF STEEL (Millions of tonnes per month) Use the previous graph to complete the first row of the following table by indicating the quantity of steel supplied by U. S. producers, demanded by U.S. consumers, and imported from China under free trade. Quantity Supplied by U.S. Quantity Demanded by U.S. Producers Consumers Quantity Imported from China (Millions of tonnes of steel per (Millions of tonnes of steel per (Millions of tonnes of steel per month) month) month) Free Trade Trade with Tariff Suppose American steel manufacturers convince the U.S. government that Chinese firms are selling steel in the U.S. market at well below the cost of producing the steel, a practice known as dumping. In response to the accusations, the U.S. government puts a tariff of $100 per tonne on steel from China. The tariff increases the price of steel from $300 to per tonne. Complete the second row of the previous table by indicating the quantity of steel supplied by U.S. producers, demanded by U. S. consumers, and imported from China in the presence of a $100pertonne tariff On the following graph, use the black line (cross symbol) to indicate the domestic price of steel in the presence of a $100pertonne tari'. Then use the green area (triangle symbol) to shade the area that represents consumer surplus under the tariff, and use the purple area (diamond symbol) to shade the area that represents producer surplus under the tariff. Finally, use the grey rectangle (star symbols) to show the revenue that the U.S. government collects as a result of the tari', and use the tan triangles (dash symbols) to show the deadweight loss (DWL) from the imposition of the tariff. Note: There are two DWL triangles. Plot the rightmost DWL triangle first, then plot the leftmost DWL triangle after that. Plotting the DWL triangles out of order may cause your answer to be graded incorrectly. 1000 Domestic Demand Domestic Supply 900 Price with Tariff 800 700 4 600 Consumer Surplus 500 PRICE (Dollars per tonne) 400 Producer Surplus Free Trade Price 300 200 Tariff Revenue 100 0 20 40 60 80 100 120 140 160 180 200 DWL QUANTITY OF STEEL (Millions of tonnes per month) True or False: According to this model, restricting trade using tariffs helps consumers but harms domestic producers. O True False