International Economics 14th Edition by Robert Carbaugh

تمرين 4

Assume that the United States, as a steel-importing nation, is large enough so that changes in the quantity of its imports influence the world price of steel. The U.S. supply and demand schedules for steel are illustrated in Table 4.13, along with the overall amount of steel supplied to U.S. consumers by domestic and foreign producers. Using graph paper, plot the supply and demand schedules on the same graph.
a. With free trade, the equilibrium price of steel is $ ______ per ton. At this price, ______ tons are purchased by U.S. buyers, _____ tons are supplied by U.S. producers, and ______ tons are imported.
b. To protect its producers from foreign competition, suppose the U.S. government levies a specific tariff of $250 per ton on steel imports.
(1) Show graphically the effect of the tariff on the overall supply schedule of steel.
(2) With the tariff, the domestic price of steel rises to $_____ per ton. At this price, U.S. buyers purchase _____ tons, U.S. producers supply _____ tons, and _____ tons are imported.
(3) Calculate the reduction in U.S. consumer surplus due to the tariff-induced price of steel, as well as the consumption, protective, redistribution, and domestic revenue effects. The deadweight welfare loss of the tariff equals $_____.
(4) By reducing the volume of imports with the tariff, the United States forces the price of imported steel down to $_____. The U.S. terms of trade thus (improves/worsens), which leads to (an increase/a decrease) in U.S. welfare. Calculate the terms-of-trade effect.
(5) What impact does the tariff have on the overall welfare of the United States?