Question

Figure S: Market fo Steel n U.S. $2000 $1800 $1600 $1400 $1200 $1000 t- $400 $200 1 2 3 4 5 6 7 910 quantity 19. Suppose the curves above represent the U.S. domestic supply and demand. Canada has a comparative advantage in steel production and sells to the U.S. at the world price of $400 per ton. If the U.S. adds a tariff of $400 to this price, by how much would domestic production increase? Increase ou 2 28 Using the same information from part A, by how much would imports decrease with the tariff? ecreose 2y Shade the area(s) representing deadweight loss from the tariff. What would these areas be a part of with free trade (at the world price of $400)? the wox in between Prooduce ad corivmer suplu 22. List one of the arguments for trade protection that we discussed in class that the steel industry might use to lobby for a tariff. Since the foreign compettion i competitive, f a terif is not oleced would go down which resuls n peopie losirg their İob in the steel inoastry isnot ploced on steel then doncstic preduct to

Answer 1

19. At world price, quantity supplied is 2 units.

At price after tariff, quantity supplied is 4 units.

So, domestic production increases by 4 - 2 = 2 units.

20. Imports without tariff = Quantity demanded - Quantity supplied = 8 - 2 = 6 units

Imports with tariff = 6 - 4 = 2 units

Imports decreases by 6 - 2 = 4 units.

21.

2000 II 1800 1600 $1400 $1200 1 $1000 $600 DW $400 WL 1 23 4 5 6 7 8 9 10 quantity

DWL = Area of triangles = 1/2 x base x height = 1/2 x (4 - 2)(800 - 400) + 1/2 x (8 - 6)(800 - 400) = 400 + 400 = $ 800