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Consider a market in which the United States has comparative disadvantage Consider also that supply from China is perfectly elastic at a price of $20/unit
Consider a market in which the United States has comparative disadvantage Consider also that supply from China is perfectly elastic at a price of $20/unit and that supply from countries other than China is perfectly elastic at a price of $21/unit. Domestic Demand can be represented by the following: Q = 1000 de8 P and the domestic supply curve is Q = -20 + 2P a) (15 points) What is economic welfare in the initial situation? b) (15 points) Now consider that the U.S. government imposes a tariff of $5/unit that applies only to imports from China. What is economic welfare following the imposition of the tariff? Which of consumers, producers, and the government are better off and which are worse off following the imposition of the tariff? c) (10 points) Show the areas that correspond to your answer to part b) on a graph. Label any key points in your graph. d) (5 points) Based on your answers to parts a), b), and c), what economic rationale could the U.S. government have for imposing tariffs on China with the objective of making the United States better off
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