Question
Now suppose that domestic tire producers in the United States convince the government to impose a tariff (tax) on imported tires with the goal of
Now suppose that domestic tire producers in the United States convince the government to impose a tariff (tax) on imported tires with the goal of reducing the number of tires imported by 50% (half of what is imported with free trade).
b. How large will the tariff need to be to achieve this goal?
$ per tire
c. Using the graph below, indicate the new price with the tariff imposed, the domestic quantity supplied (Qs), and the domestic quantity demanded (Qd) that would result with the new tariff in place.
Instructions: Use the tool provided "Pw + tariff" to draw the new price after the tariff has been imposed. Then use the tools provided "Qs + tariff" and "Qd+ tariff" to indicate the domestic quantity supplied and domestic quantity demanded with this tariff in effect. Finally, use the tools provided "New CS," "New PS," and "Tariff Revenue" to illustrate these areas on the graph.
Price (dollars per tire) 320 280 240 200 160 120 80 80 40 40 0 40 Market for Tires D S Tools W 80 120 160 200 240 280 320 Quantity (millions of tires) -9 -9 Qd Qs New CS New PS :: Pw + tariff Tariff Revenu
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