Assume that under free trade the U.S. can import good x from France for $50 and domestic consumption and production are 14 million and 6 million respectively. This is the free trade price at which the U.S. consumes good x. a) Summarize the above information in a graph and label it carefully. b) Now assume that the U.S. places a tariff of $5 + 15% of the free trade price of good x. Describe the type of tariff imposed and calculate the tariff per unit of good x. c) Assume the tariff above changes domestic consumption to 12 million and production to 8 million. Show this on a graph. [Please draw a new graph for this question and label it carefully.]. Calculate and explain who gains and who loses and the net effect on domestic welfare due to the tariff compared with free trade. d) Now assume that instead of a tariff, the U.S. imposed a quota on good x with similar results on price and quantity. This means that the quota is the same amount as imports under a tariff and the new price due to the quota is the same as the price with a tariff. Calculate and explain who gains and who loses and the net effect on domestic welfare due to the quota compared with free trade. [You may use the same graph as in c) or draw a new one. In either case please label the graph carefully.] Through this, compare the use of tariffs and quotas. Continue to assume that the U.S. has imposed the quota from
Assume that under free trade the U.S. can import good x from France for $50 and domestic consumption and production are 14 million and 6 million respectively. This is the free trade
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