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The United States currently imports all of it's coffee. The annual demand for coffee by US customers is given by the demand curve Q = 250 - 10P, where Q is quantity (in millions of pounds) and P is the marketplace price every pound of coffee. World producers can harvest and ship coffee to us distributors at a constant marginal (= average) cost of $8 every pound. US distributors can in turn distribute coffee for a constant $2 every pound. The US coffee marketplace is competitive. Congress is considering a tariff on coffee imports of $2 every pound.

a) If there is no tariff, explain how much does customer pay for a pound of coffee? Illustrate what is the quantity demanded?

b) If the tariff is imposed, explain how much will customer's pay for a pound of coffee? Illustrate what is the quantity demanded?

c) Estimate the lost customer surplus

d) Estimate 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?
I'm not certain if I am correct on the following or not.

a) Customers will pay $10 dollars every pound and the quantity demanded would be 23.936 million pounds.

b) I am not sure Explain how to get started on this part.

For the rest I am having a difficult time putting a graph together because I don't know Illustrate what the supply curve looks like and I assume if I input the demand curve function into my calculator the graph I see is accurate, right?

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M9168076

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