Posted: August 2nd, 2015

In the absence of trade, equilibrium is at point E, where D? and S? intersect, so that P? = $5 and Q?=400.

In the absence of trade, equilibrium is at point E, where D? and S? intersect, so that P? = $5 and Q?=400. With free trade at the world price of P? = $3m domestic consumers purchase AC=600X, of which AB=200X are produced domestically and BC=400X are imported, the tariff inclusive price will be $3(1+.33) = $4. What are the impacts of tariff on domestic consumption, domestic production, imports, and government s tariff revenue? Please show the numbers, for example, the domestic consumption will decrease from 600X to 500X.