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Suppose USA is a small country in sugar market. At present, there is no tariff on...

  1. Suppose USA is a small country in sugar market. At present, there is no tariff on sugar import. However, beginning January 2015, the U.S. government starts levying 10 % tariff on sugar import. Using an appropriate graphs explain what happens in the U.S. sugar market? Who gains, who loses and what will be overall welfare effect?
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Answer #1

Hence, there is a welfare loss to the nation. Area D and area E indicates the production distortion loss and the consumption distortion loss, respectively.

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