Suppose US and China are two large countries in a steel market. Assume the U.S. import demand and China's export supply curves are linear. With free trade the US imports 30 tonnes of steel from China at a price of $20 / tonne. Then Trump starts a trade war with China. (a) Suppose he introduces a tariff of $6 / tonne. As a result of the tari1 the price of steel paid in the US rises to $24 and imports fall to 22 tonnes. Evaluate the effect of this policy by answering the following questions, supplementing your answers with a graph showing the import market (like panel (b) in Figure 8-9 in the textbook). (i) What impact does the tariff have on the world price? (ii) What is the tariff revenue in the US? (iii) What is the deadweight loss in the US caused by the tari'? (iv) How large is the overall gain or loss for the US economy from imposing the tariff? (v) How large is the overall gain or loss for China? (vi) How large is the gain or loss for the world? (b) Suppose instead he introduces a larger tari of $12/tonne. As a result of the tariff, the price of steel paid in the US rises to $28 and imports fall to 14 tonnes. Evaluate the eect of this policy (relative to free trade) by following the same steps (i)(vi) as in part (a) above. When is welfare of the US the highest: with free trade, a modest tari, or a large tariff