Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 2

The U.S. International Trade Commission's committee in charge of the global safeguard investigation involving imports of steel has announced its recommendations to be forwarded to the president. Of the 33 steel product categories investigated, 12 have experienced a significant increase in the quantity of imported steel, causing serious injury or the threat of serious injury to the U.S. steel industry. The commission has recommended that the president impose a 20 percent tariff on these 12 categories of imported steel. If the president follows the commission's recommendations, what will happen to the supply of foreign steel in these categories? What impact will this have on the equilibrium quantity of steel sold (in these categories) in the United States? Will the equilibrium price for these categories of steel in the United States market increase or decrease? Explain