Based on your answer to Problem 31-16, what are the total tariff revenues of the U.S. government? What percentage do U.S. consumers ultimately pay because of a higher price generated by the tariff?

Problem 31-16

Take a look at panel

(a) of Figure 31-4. On a per- unit basis, how much of the $50-per-unit tariff on imported tablet devices is paid by U.S. consumers? On a per-unit basis, how much of the $50-per-unit tariff is paid by Chinese tablet-producing firms?

Transcribed Image Text:

FIGURE 31-4 Without a tariff, the United States buys 10 million tablet devices per year imported from China at an average price of $200, at point E, in panel (a). U.S. producers sell 5 million domestically made tablets, also at $200 each, at point E in panel (b). A $50 tariff per tablet will shift the Chinese import Price per Tablet Device ($) 225 The Effect of a Tariff on Chinese-Made Tablet Devices 200 Panel (a) $50 tariff E L E S S 8 10 Chinese-Made Tablet Devices (millions) supply curve to S in panel (a), so that the new equilibrium is at E with price increased to $225 and quantity sold reduced to 8 million per year. The demand curve for U.S.-made tablets (for which there is no tariff) shifts to D, in panel (b). Domestic sales increase to 6.5 million per year, at point E2. Price per Tablet Device ($) 225 200 Panel (b) E Liv E S D D 5.0 6.5 U.S.-Made Tablet Devices (millions)