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Suppose that the world price for steel is below the U.S. domestic price, but the government requires that all steeled in the United States be domestically produced. the government requires that all steeled in the United States be domestically produced.
A. Use a diagram like the one below to show the gins and losses from such a policy.
B. How could you estimate the net welfare loss (deadweight loss) from such a diagram?
C. What response to such a policy would you expect producers from industries (like automobile producers) that use U.S. steel?
D. What government revenues are generated by this policy?
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