The world producer price for baseball is $24 per dozen, and almost all of them are produced
outside the United States. Suppose the U.S. demand curve and supply curves are:
QD = 100 000 – 2 000 P
QS = - 10 000 + 1 000 P
P : price per dozen
Q: dozens
1) Before a tariff is imposed, what is the U.S. equilibrium price? Domestic consumption?
Domestic production? imports?
2) Congress has decided to help the baseballmanufacturing industry by imposing a tariff of $ 6 per dozen. What are the new equilibrium price, domestic consumption, domestic production, and imports?
3) What are the losses to U.S. consumers, gains to U.S. producers, and deadweight loss? (Hint: The area of a trapezoid is [height] [ base 1 + base 2 ] / 2 where base 1 and base 2 are the parallel sides of the trapezoid.)
Task #273282
(1). Before a tariff is imposed, what is the U.S. equilibrium price? Domestic consumption? Domestic production? imports?
Solution:
The domestic consumption equilibrium is:
The domestic production equilibrium is :
Imports :
(2) . Congress has decided to help the baseball manufacturing industry by imposing a tariff of $ 6 per dozen. What are the new equilibrium price, domestic consumption, domestic production, and imports?
Solution;
The new equilibrium price after the tariff is:
The domestic consumption equilibrium is:
The domestic production equilibrium is :
Imports fall from:
(3). What are the losses to U.S. consumers, gains to U.S. producers, and dead weight loss? (Hint: The area of a trapezoid is [height] [ base 1 + base 2 ] / 2 where base 1 and base 2 are the parallel sides of the trapezoid.)
Solution:
The loss in consumer surplus is the area of the trapezoid:
The gain in producer surplus is the are of the trapezoid:
Revenue earned by the government form the tariff:
Dead weight loss:
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