Annual demand for coffee by U.S consumers is Q = 250 – 10P. The world producers can harvest and ship coffee to U.S. distributers at the constant marginal (average) cost of $8 per pound. The U.S. distributors can in turn distribute coffee for the constant $2 per pound. The U.S. coffee is competitive. Congress is considering the tariff on coffee introduces of $2 per pound.
problem 1: If the tariff is obliged, how much consumers will pay for the pound of coffee? What is quantity demanded?
problem 2: Compute the lost consumer surplus?
problem 3: Compute the tax revenue gathered by the government?
problem 4: Does the tariff result in the net gain or the net loss to society as a entire?