Figure 7-2 Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff.
-Refer to Figure 7-2.With the tariff in place,the United States

Question

Figure 7-2  Suppose the U.S.government imposes a $0.75 per pound tariff on coffee imports.Figure 7-2 shows the impact of this tariff.
-Refer to Figure 7-2.With the tariff in place,the United States

Quizplus · Accepted Answer

With the $0.75 per pound tariff, the world price of coffee rises from $1.50 to $2.25. At this new price, the quantity demanded in the United States falls from 36 million pounds to 24 million pounds, while the quantity supplied domestically increases from 24 million pounds to 36 million pounds. The difference between domestic supply and demand (12 million pounds) must be imported, and with the tariff in place, the effective price of imported coffee is $2.25 per pound. Thus, the United States imports 12 million pounds of coffee.