Price Quantity Supplied Quantity Demanded (dollars per pound) (thousands of poun

Question

Price Quantity Supplied Quantity Demanded
(dollars per pound) (thousands of pounds per year) (thousands of pounds per year)
21 120 60
18 100 100
15 80 140
12 60 180
9 40 220
1) The United States imports cheese from a variety of countries. The table above gives the domestic supply
of, and demand for, cheese in the United States. The world price of cheese is $12 per pound, and trade is
unrestricted.
a) How many pounds of cheese are consumed in the United States?
b) How many pounds of cheese are produced in the United States?
c) How many pounds of cheese are imported into the United States?
If a $3 per pound tariff is imposed,
d) How many pounds of cheese are consumed in the United States?
e ) How many pounds of cheese are produced in the United States?
f) How many pounds of cheese are imported into the United States?
g) How much will the U.S. government collect in tariff revenue?
h) Who benefits from the tariff? Who loses

Explanation / Answer

a) The quantity demanded at the world price of $12 (180) is the quantity consumed domestically. b) The quantity supplied at the world price of $12 (60) is the quantity produced domestically. c) The difference between these two, (120) is the quantity imported If a $3/pound tariff is imposed, the price becomes 15 d) The new quantity consumed under the tariff is 140 e) The new quantity produced under the tariff is 80 f) The new quantity imported is therefore 60 g) at $3/pound that is imported, the government raises $180(thousand since quantities are in thousands of pounds) h) The government benefits from the tariff, domestic producers, who now receive a higher price for their goods and will produce more of it also benefit. Consumers lose since they have to pay more for their cheese and get less of it. Foreign producers also lose out, since under the new price, less cheese gets imported.

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