Americans buy 5,000 plywood boards for $20 each with 4,000 coming from Canada. Prez. Trump slaps...

Americans buy 5,000 plywood boards for $20 each with 4,000 coming from Canada. Prez. Trump slaps a $10 tariff on any from Canada and with the tariff now 4,000 are sold for $30 each with half coming from Canada.

With the tariff . . . .

1.How much more do consumers pay in price?

a.How many less do they buy?

b.How much more in price USA suppliers get?

2.How many more do USA suppliers sell?

a.How much more do Canada suppliers get paid for each?

b.How many less do Canada suppliers sell?

3.What does the government get?

Solutions

Expert Solution

Since Americans buy 5,000 plywood boards for $20 each with 4,000 coming from Canada. Prez. Trump slaps a $10 tariff on any from Canada and with the tariff now 4,000 are sold for $30 each with half coming from Canada.

With the tariff consumer pay $10 more for each unit of plywood boards.

Without tariff the Qd=5000

With tariff the Qd=4000

It means 1000 less plywood are purchased now.

The US suppliers are getting $10 more per plywood.

Since after tariff 2000 is sold by the domestic sellers and 2000 is import from Canada.

Since without tariff the domestic sellers were selling 1000 but now they are selling 2000.

It means after tariff they are selling 1000 more plywood.

The Canada sellers get the same price for each plywood after tariff.

Without tariff Canada used to sell=4000

After tariff=2000

It means 2000 less plywood are supplied after tariff.

The government get tax revenue of=Tax*imported quantity after tariff

=10*2000

=$20,000

Rahul Sunny answered 1 year ago

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