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The demand and supply curves above represent the U.S. demand for cotton shirts as well as what will be supplied by U.S. cotton shirt producers
The demand and supply curves above represent the U.S. demand for cotton shirts as well as what will be supplied by U.S. cotton shirt producers (supply curve represents domestic supply). With free trade, the price of shirts is $20. The United States adds a $10 tariff to imported cotton shirts. Please answer the questions by uploading your answers. Please include graphs and illustrations.
- What is the difference in demand based on free trade versus the $10 tariff?
- What is the difference in what the domestic suppliers (U.S. firms) produce based on free trade versus tariff?
- What is the difference in imports based on free trade versus tariff?
- Show, graph, and illustrate changes in consumer surplus, producer surplus, and total surplus based on the change from free trade to the tariff.
- Show, graph, and illustrate the area of deadweight loss based on the change from free trade to the tariff.
- Explain winners and losers based on the change from free trade to a tariff.
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