Consider the market for automobiles in the United States. In the absence of trade, the equilibrium price of an average sedan is $20,000, and the equilibrium quantity is 100 million cars per year.
A. Illustrate the above-mentioned situation on a supply-demand graph with quantity of cars (in millions) on the x-axis and price (in thousands) on the y-axis. Mark the supply curve as the U.S. supply.
B. Suppose that the world price of an average sedan is $16,000. At this price, the domestic suppliers can supply 60 million cars, and the demand is 140 million cars. On the graph, illustrate the world supply curve, the domestic supply, the domestic demand, and the quantity of imports.
C. Suppose that the United States imposes a $2,000 per car tariff on imports. As a result, domestic supply increases to 80 million cars, and domestic demand decreases to 120 million cars. On the graph, show the impact of this tariff and the resulting changes in supply, demand, and imports.
D. What is the total revenue of the government because of the import tariffs?

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The Answer of Consider the market for automobiles in the United States. In the absence of trade, the equilibrium price of an average sedan is $20,000, and the equilibrium quantity is 100 million cars per year.
A. Illustrate the above-mentioned situation on a supply-demand graph with quantity of cars (in millions) on the x-axis and price (in thousands) on the y-axis. Mark the supply curve as the U.S. supply.
B. Suppose that the world price of an average sedan is $16,000. At this price, the domestic suppliers can supply 60 million cars, and the demand is 140 million cars. On the graph, illustrate the world supply curve, the domestic supply, the domestic demand, and the quantity of imports.
C. Suppose that the United States imposes a $2,000 per car tariff on imports. As a result, domestic supply increases to 80 million cars, and domestic demand decreases to 120 million cars. On the graph, show the impact of this tariff and the resulting changes in supply, demand, and imports.
D. What is the total revenue of the government because of the import tariffs?

Consider the Market for Automobiles in the United States