TLC Ter HA eRe NAl Site 201 TLCTeNA NA NA ? https://myane.edu.au/ereserverbiblio
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TLC Ter HA eRe NAl Site 201 TLCTeNA NA NA ? https://myane.edu.au/ereserverbiblioID-71728 ? | a x videos 110% … 4 of 5 -+Automatic Zoom Question4 The United States currently imports all of its coffee. The annual demand for coffee by U.S consumers is given by the demand curve Q 250 10P, where Q is quantity (in millions of kilograms) and P is the market price per kilogram of coffee. World producers can harvest and ship coffee to U.S. distributors at a constant marginal (average) cost of S8 per kilogram. U.S. distributors can in turn distribute coffee for a constant $2 per kilogram. The U.S. coffee market is competitive. The U.S. Congress is considering imposing a tariff on coffee imports of $2 per kilogram. a. If there is no tariff, how much do consumers pay for a kilogram of coffee? What is the quantity demanded? If the tariff is imposed, how much will consumers pay for a kilogram of coffee? What is the quantity demanded? b. c. Calculate the lost consumer surplus. d. Calculate the tax revenue collected by the government. e. Does the tariff result in a net gain or a net loss to society as a whole?Explanation / Answer
Q = 250 - 10P
10P = 250 - Q
P = 25 - 0.1Q
(a) Without tariff, aggregated matginal cost (MC) = Unit cost of shipping + Unit cost of distribution = $8 + $2 = $10
In competitive market, price equals MC.
25 - 0.1Q = 10
0.1Q = 15
Q = 150
Price = MC = $10
(b) With tariff, aggregate MC = $10 + Unit tariff = $10 + $2 = $12
Equating price and MC,
25 - 0.1Q = 12
0.1Q = 13
Q = 130
Price = MC = $12
(c)
Loss in consumer surplus = (1/2) x Unit tariff x (Quantity demanded before tariff + Quantity demanded after tariff)
= (1/2) x $2 x (150 + 130)
= $1 x 280
= $280
(d)
Tax (tariff) revenue = Unit tariff x Quantity demanded after tariff = $2 x 130 = $260
NOTE: As per Chegg Answering Policy, 1st 4 parts are answered.
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