The domestic supply and demand curves for Jolt coffee beans are given by P = 10 + Q and P = 100 - 2Q, respectively, where P is the price in dollars per bushel, and Q is the quantity in millions of bushels per year. The United States produces and consumes only a trivial fraction of world Jolt bean output, and the current world price of $30/ bushel is unaffected by events in the U. S. market. Transportation costs are also negligible.
a. How much will U. S. consumers pay for Jolt coffee beans, and how many bushels per year will they consume?
b. How will your answers to part (a) change if Congress enacts a tariff of $20/ bushel?
c. What total effect on domestic producer and consumer surplus will the tariff have? How much revenue will the tariff raise?

  • CreatedDecember 12, 2014
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