Question
The table below describes how many tonnes of steel would be produced, consumed, and imported by the U.S. with and without a $100 tariff. Situation
The table below describes how many tonnes of steel would be produced, consumed, and imported by the U.S. with and without a $100 tariff.
Situation without Tariff | Situation with Tariff | |
World Price | $500 per tonne | $500 |
Tariff | 0 | $100 per tonne |
U.S. Price | $500 per tonne | $600 per tonne |
U.S. Consumption (million tonnes) | 100 | 90 |
U.S. Production (million tonnes) | 60 | 70 |
Imports (million tonnes) | 40 | 20 |
Use the above table to calculate and answer the following. Assume that supply and demand are straight lines. Chapter 8 of the textbook will be very helpful in answering the questions. Keep in mind that "consumers" include firms that import steel to be used for production (e.g., car manufacturers):
a. U.S. consumers' (importers) loss from imposing the tariff.
b. U.S. producers' gain from imposing the tariff.
c. The government tariff revenue gain.
d. The net welfare effect on U.S. well-being.
e. Based on the numbers in the Table, is the U.S. a large or small country when it comes to steel?
f. If the U.S. were a large consumer of steel, what would happen to the world price after the tariff is imposed?
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