From the previous question, suppose the US imposes a $2,000 tariff on each car. Further, suppose that domestic quantity demand falls by 200 and domestic quantity supplied rises by 200. What is the new quantity of imports? How does a tariff harm societal welfare?
Previous question: Suppose, the world price for cars is $10,000. Further, the US has a quantity demand at that price of 1,000 cars, and a quantity supplied of 200. How many cars will the US import to satisfy domestic demand?
the import after the tariff is 400 units
How does tariff harm societal welfare?
The tariff increases producer surplus but decreases producer surplus more than that.
It makes a deadweight loss =0.5* tariff * change in quantity demanded +0.5* tariff * change in quantity supplied
It reduces the total surplus by $400000 or is create a deadweight loss of $400000
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