Solution-Compute the dollar gain or loss to domestic

Compute the dollar gain or loss to domestic consumers

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1. The US is a small producer in the world bean market, where the current world price is 60 cents per pound. Congress is considering a tariff of 20 cents per pound of beans. The domestic supply and demand curves for beans are as follows, where P = price (cents per pound), and Q = quantity (millions of pounds):

Demand: P = 200 - 2Q

Supply: P = 50 + Q

a. Drawing a supply and demand diagram, find the domestic equilibrium price and quantity of beans under autarky.

b. Suppose the domestic market is opened up to trade. At the world price of 60 cents, find the domestic supply, the domestic demand, and the level of imports.

c. If the tariff were imposed, find the resulting domestic price of beans, domestic quantity supplied, and level of imports.

d. Compute the dollar gain or loss to domestic consumers, domestic producers, and government revenue from the imposition of the tariff. What is the deadweight loss?

Reference no: EM132079933

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Compute the dollar gain or loss to domestic consumers

Reference no: EM132079933

Reference no: EM132079933

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