ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Consider the domestic steel market. Under autarky,
the domestic equilibrium is such that 8 million pounds of steel are
produced and sold at a price of $12 per pound.
International producers, generally, are able to produce at a lower cost
than domestic producers. Under an open trade policy, the world price
of $6 enters the domestic market as an exogenous variable.
For the questions below, assume that the domestic market is
beginning in the equilibrium that exists under an open trade policy and
consider the impact of a $3 per pound tariff on imported steel.
What is the gain in producer surplus from the tariff? $ million.
(round your answer to two decimal palces)
What import quota, Q, would produce the same gain in producer
surplus as the tariff? Q
million pounds (enter your response as a
whole number).
million. (round your
What is the deadweight loss using a quota? $
answer to two decimal places and enter it as a positive number)
Price/pound
30-
27-
24-
21-
18-
15-
12-
9-
6-
3-
0+
0
B
F
2
Domestic Steel Market
A
C
G
D
E
6
8
10
Millions of pounds
H
Sdomestic
wp + tariff
wp
12
D domestic
14
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Transcribed Image Text:Consider the domestic steel market. Under autarky, the domestic equilibrium is such that 8 million pounds of steel are produced and sold at a price of $12 per pound. International producers, generally, are able to produce at a lower cost than domestic producers. Under an open trade policy, the world price of $6 enters the domestic market as an exogenous variable. For the questions below, assume that the domestic market is beginning in the equilibrium that exists under an open trade policy and consider the impact of a $3 per pound tariff on imported steel. What is the gain in producer surplus from the tariff? $ million. (round your answer to two decimal palces) What import quota, Q, would produce the same gain in producer surplus as the tariff? Q million pounds (enter your response as a whole number). million. (round your What is the deadweight loss using a quota? $ answer to two decimal places and enter it as a positive number) Price/pound 30- 27- 24- 21- 18- 15- 12- 9- 6- 3- 0+ 0 B F 2 Domestic Steel Market A C G D E 6 8 10 Millions of pounds H Sdomestic wp + tariff wp 12 D domestic 14
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