(Trade Restrictions) Suppose that the world price for steel is below the U.S. domestic price, but the government requires that all steel used in the United States be domestically produced. a. Use a diagram like the one that follows to show the gains and losses from such a policy. b. How could you estimate the net welfare loss (deadweight loss) from such a diagram? c. What response to such a policy would you expect from indus- tries (like automobile producers) that use U.S. steel?
(Trade Restrictions) Suppose that the world price for steel is below the U.S. domestic price, but the government requires that all steel used in the United States be domestically produced. a. Use a diagram like the one that follows to show the gains and losses from such a policy. b. How could you estimate the net welfare loss (deadweight loss) from such a diagram? c. What response to such a policy would you expect from indus- tries (like automobile producers) that use U.S. steel?
Chapter19: International Trade
Section: Chapter Questions
Problem 2.7P
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