Barriers to Trade Scenario: You own Steelco, a U.S.-based company that produces steel. You and other U.S.-based steel producers have been losing customers to Chinese producers, who charge a lower price for their steel. One of the other steel companies convinced the U.S. government to impose a tariff on Chinese steel, and you want to identify how the tariff will impact how much steel you should produce. Information: Chinese Steel Current price of Chinese steel per metric ton = $600 Tariff = $500 added per metric ton of Chinese steel imported into the U.S. Price of Chinese steel per metric ton after the tariff = $1,100 Current quantity of Chinese steel imported from China to the U.S. each year = 2 million metric tons All other U.S. steel producer Without the tariff and with China producing 2 million metric tons of steel at $600 all other steel manufacturers would produce = 1 million metric tons of steel. Without China in the market, it estimated that all other U.S. steel manufacturers will produce 2.5 million metric tons of steel at an equilibrium price of $900/metric ton of steel. a. Draw a supply and demand curve showing the supply and demand for U.S.-produced steel before and after the tariff. b. What is the estimated equilibrium price of U.S. steel without imported Chinese steel? c. What is the estimated quantity of U.S.-produced steel without imported Chinese steel?

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter19: International Trade

Section: Chapter Questions

Problem 3QFR

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Answer the questions on the right based on the following scenario:

Barriers to Trade Scenario: You own Steelco, a U.S.-based company that produces steel. You and other U.S.-based steel producers have been losing customers to Chinese producers, who charge a lower price for their steel. One of the other steel companies convinced the U.S. government to impose a tariff on Chinese steel, and you want to identify how the tariff will impact how much steel you should produce.

Information:

Chinese Steel
- Current price of Chinese steel per metric ton = $600
- Tariff = $500 added per metric ton of Chinese steel imported into the U.S.
- Price of Chinese steel per metric ton after the tariff = $1,100
- Current quantity of Chinese steel imported from China to the U.S. each year = 2 million metric tons
All other U.S. steel producer
- Without the tariff and with China producing 2 million metric tons of steel at $600 all other steel manufacturers would produce = 1 million metric tons of steel.
- Without China in the market, it estimated that all other U.S. steel manufacturers will produce 2.5 million metric tons of steel at an equilibrium price of $900/metric ton of steel.

a. Draw a supply and demand curve showing the supply and demand for U.S.-produced steel before and after the tariff.

b. What is the estimated equilibrium price of U.S. steel without imported Chinese steel?

c. What is the estimated quantity of U.S.-produced steel without imported Chinese steel?

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Identify and explain who will make and lose money from this tariff.

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