The table below indicates the U.S. domestic supply and demand schedule for steel.

Illustrate the table graphically. Identify the domestic equilibrium price and quantity.

Price Quantity Quantity

Demanded Supplied

(millions tons) (millions tons)

$140 0 1200

130 50 1100

120 100 1000

110 150 900

100 200 800

90 250 700

80 300 600

70 350 500

60 400 400

50 450 300

40 500 200

30 550 100

20 600 0

a. Suppose the world price of steel is $30, and trade opens. Determine the quantity of steel supplied by domestic producers, the quantity of steel imports, and total surplus with free trade. Show work.

b. In an effort to protect producers from foreign competition, the U.S. imposes a tariff of $20 per ton tariff on imports. Determine the post tariff price charged to domestic consumers, the quantity of steel supplied by domestic producers, and the quantity of steel imported. Use the graph in part a. to illustrate your results. Calculate the value of the dead weight loss?

c. Suppose that rather than a tariff, the U.S. government issues a $20 per ton subsidy to domestic producers. Show the impact of the subsidy using a new supply and demand diagram. What price do domestic consumers pay after the subsidy? How much steel is imported?

d.Calculate consumer surplus, producer surplus, the cost of the subsidy, and the dead weight loss.

e. Compare the results of the policies on producer surplus, consumer surplus, and economic welfare(DWL).