(Table: Export Supply Elasticities) This table gives the foreign elasticity of supply for several types of U.S. steel imports. It is almost certain that the 2002 imposition of 13% to 15% tariffs on steel tubes and pipes resulted in:
A) terms-of-trade gains that were greater than deadweight losses.
B) terms-of-trade gains that equaled deadweight losses.
C) deadweight losses that were greater than terms-of-trade gains.
D) no deadweight losses.

Question

(Table: Export Supply Elasticities) This table gives the foreign elasticity of supply for several types of U.S. steel imports.  It is almost certain that the 2002 imposition of 13% to 15% tariffs on steel tubes and pipes resulted in:
A) terms-of-trade gains that were greater than deadweight losses. 
B) terms-of-trade gains that equaled deadweight losses. 
C) deadweight losses that were greater than terms-of-trade gains. 
D) no deadweight losses.

Quizplus · Accepted Answer

The table shows that the foreign elasticity of supply for steel tubes and pipes is 2.2, which is relatively elastic. This means that the imposition of tariffs by the U.S. would result in a significant reduction of imports, causing a deadweight loss. Additionally, since the demand for steel tubes and pipes is likely to be relatively inelastic in the short run, the price of steel tubes and pipes in the U.S. market would increase, resulting in a terms-of-trade gain for U.S. producers. However, the magnitude of the deadweight loss is likely to be greater than the magnitude of the terms-of-trade gain, resulting in a net welfare loss for the U.S. economy. Therefore, choice (C) is the most accurate answer.

(Table: Export Supply Elasticities) This Table Gives the Foreign Elasticity