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Domestic Supply for t-shirts, Qs = 100P - 1000.  Domestic Demand, Qd = 1000 -1P.  Draw the American...

  1. Domestic Supply for t-shirts, Qs = 100P - 1000.  Domestic Demand, Qd = 1000 -1P.  Draw the American (domestic) Market for shirts with an Equilibrium DOMESTIC Price of $19.8 a shirt.
    1. The Chinese can supply an unlimited number of shirts for $5.
    2. The Vietnamese can supply and unlimited number of shirts for $7 a shirt.
    3. Draw in the Chinese and Vietnamese price curves.  (flat lines)
    4. Assuming there is free trade
      1. How much is domestically produced?
      2. How much is domestically demanded?
      3. How much is imported? And from whom?
      4. Label
        1. PS
        2. CS
    5. Now the US government adds a $10 tariff per shirt on CHINESE IMPORTS.
      1. How much is domestically produced?
      2. How much is domestically demanded?
      3. How much is imported? AND FROM WHOM?
      4. Label with tariff
        1. PS
        2. CS
        3. GR
        4. DWL
      5. Did this tariff help any Americans?

Solutions

Expert Solution

No. Tariff did not help any americans, neither consumers nor producers. As a result of tariff consumer surplus decreases and producer surplus remains same. Tariff did not earn government any revenue, as after tariff import from china fell to zero units. After tariff people stated using t-shirt imported from Vietnam. Thus no one other than Vietnam producer gain from tariff.

Rahul Sunny answered 2 years ago
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