Calculate the deadweight loss

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Reference no: EM13801016

Suppose the demand and supply for wine within the U.S. is:

Qd = 100 - 20P [U.S. demand curve]

Qs = 20 + 20P [U.S. supply curve]

Suppose the demand and supply for wine in the rest of the world (R.O.W.) is:

Qd = 80 - 20P [R.O.W. demand curve]

Qs = 40 + 20P [R.O.W. supply curve]

Calculate the deadweight loss if the U.S. imposes a tariff of 25 cents per bottle of imported wine.

[Note: P = price per unit; Qd = billions of units demanded; Qs = billions of units supplied]

Reference no: EM13801016

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