Question

(Note: Round your answers to the nearest tenth if you have a decimal point.) 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 below, along with the overall amount of steel supplied to U.S. consumers by domestic and foreign producers. Price/Ton Quantity Supplied (Domestic) $100 150 200 250 300 350 0 0.5 1.0 Table: Supply and Demand: Tons of Steel (United States) Quantity Supplied Quantity (Domestic + Demanded Imports) 15.0 14.5 14.0 13.5 13.0 105 12.5 12.0 11.5 16 11.0 10.5 20 10.0 9.5 9 2.0 2.5 3.0 18 3.5 4.0 4.5 5.0 700 9.0

Answer 1

HOMEWORKLIB POLICY requires to solve first 4 parts. Solving as many as possible in given time. Thank you.

Explanation in parenthesis.

With free trade, the equilibrium price of steel is $400 per ton (equilibrium price will be where total supply=total demand, which happens when price is 400). At this price, 12 tons (explained earlier) are purchased by U.S. buyers, 2 tons (given in the table)are supplied by the US producers, and 10 tons (12-2) are imported.

The effect of tariff is shown in the graph below.

Price $800 Domestic Supply $700 Imports $600 Total *Supply $500 Tariff $400 $300 $200 $100 $0 mports Demand 4.5 4 8 9.5 12 16 20 Quantity (tons) 0 24

Initial imports are shown. New imports post tariffs are shown as imports'.

With the tariff, the domestic price of steel rises to $650 (earlier price+tariff) per ton. At this price, US buyers purchase 9.5 (given in the table and shown in the graph) tons. US producers supply 4.5 (given, shown) tons, and 5 (9.5-4.5) tobs are imported.

Price $800 Domestic Supply $700 Imports $600 Total *Supply $500 Tariff $400 $300 $200 $100 $0 mports Demand 4.5 4 8 9.5 12 16 20 Quantity (tons) 0 24