To see the impact of a tariff, consider a hypothetical example of trade in wire

Question

To see the impact of a tariff, consider a hypothetical example of trade in wire hangers between the United States and China. For simplicity, assume that China is the only source of U.S. wire hanger imports. The following graph shows the U.S. market for wire hangers. Note that in the absence of any trade, the market price for hangers in the United States is $35 per crate, and the equilibrium quantity is 14,000 crates per week. When the United States allows free trade in wire hangers with China, the price of hangers in the U.S. market is $10 per crate. At this price, the quantity of hangers supplied by U.S. producers is quantity of hangers demanded by U.S. buyers is imported by the United States from China each week is crates per week, the crates per week, and the quantity of hangers each week is- crates of hangers. Use the green triangle (triangle symbols) to show U.S. consumer surplus under free trade with China, and use the purple triangle (diamond symbols) to show U.S. producer surplus under free trade with China PRICE IDollars per crate 80 70 60 50 Consumer surplus DomesticConsumer su Suppl Domestic Demand Producer surplus 40 30 20 10 Price with 0 48 12 16 20 24 28 32 CRATES OF HANGERS IThousands per weekl HelpCiea All

Explanation / Answer

at p=10,supplid quantity is 4, and demand is 24, so US has to import 20 crates

supplying at low price in other country is called dumping. after tariff import decreases to 4 crates.

govt revenue increases by 4*(30-10)=80

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