Homework Answers
After tariff world price increases from 4 to 5
At Pw + t = 5
Qd = 100
Qs = 80
CS = 1/2(10-5)100
= 1/2(5)100
= 250
PS = 1/2(5 - 1)80
= 1/2(4)80
= 160
b) Tax revenue = (100- 80)(5-4)
= 20
So U.S. govt. collects 20 million from tariff.
c) DWL1 = 1/2(80 - 60)(5 -4)
= 1/2(20)
= 10
DWL2 = 1/2(120 - 100)(5-4)
= 1/2(20)
= 10
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