Question

Price (dollars per pound)Quantity supplied (thousands of pounds per year)Quantity demanded (thousands of pounds per year)21120601810010015801401260180940220

The United States imports cheese from a variety of countries. The table 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 U.S?

b. How many pounds of cheese are produced in the U.S?

c. How many pounds of cheese are imported into the U.S?

If a $3 per pound tariff is imposed,

d. How many pounds of cheese are consumed in the U.S?

e. How many pounds of cheese are produced in the U.S?

f. How many pounds of cheese are imported into the U.S?

g. How much will the U.S. government collect in tariff revenue?

h. Who benefits from the tariff? Who loses? (4 points)

Why is it not efficient to eliminate all pollution? (3 points)

Answer 1

a. Ans: 180,000 pounds of cheese are consumed in the U.S.

b. Ans: 60 ,000 pounds of cheese are produced in the U.S.

c. Ans: 120 pounds of cheese are imported into the U.S.

Explanation:

At the world price of $12;

Domestic demand = 180,000 pounds of cheese

Domestic supply = 60,000 pounds of cheese

When Qd > Qs , then there will be shortage in the market.

So import quantity = 180,000 - 60,000 = 120,000 pounds of cheese

If a $3 per pound tariff is imposed,

d. Ans: 140,000 pounds of cheese are consumed in the U.S.

e. Ans: 80,000 pounds of cheese are produced in the U.S?

f. Ans: 60,000 pounds of cheese are imported into the U.S?

g. Ans: The U.S. government will collect $180,000 in tariff revenue.

h. Ans: Producers get benefits from the tariff whereas consumers loses .

Explanation:

After the imposition of tariff , the domestic price becomes $15 .

At this price ;

Domestic demand = 140,000 pounds of cheese

Domestic supply = 80,000 pounds of cheese

Import Quantity = 140,000 - 80,000 = 60,000 pounds of cheese

Government revenue from tariff = Tariff per pound * Total imported quantity = $3 * 60,000 = $18,000

Producer get benefits from the tariff whereas consumers loses . Because after the imposition of tariff consumers surplus decreases but producers surplus increases.

Ans: It is not efficient to eliminate all pollution becuase , it is very costly to do this activity. For the welfare of the economy or soceity , elimination of pllution should be done to the extent where total benefits exceed the total cost of eliminating of pllution.