Calculation of gain and loss

Reference no: EM1312455

The annual demand for coffee by the U.S consumers is Q = 250 - 10P . The world producers can harvest and ship coffee to U.S. distributers at a constant marginal (=average) cost of $8 per pound. The U.S. distributors can in turn distribute coffee for a constant $2 per pound. The U.S. coffee is competitive. Congress is considering a tariff on coffee imports of $2 per pound.

a) If the tariff is imposed, how much consumers will pay for a pound of coffee? What is the quantity demanded?

b) Calculate the lost consumer surplus?

c) Calculate the tax revenue collected by the government?

d) Does the tariff result in a net gain or a net loss to society as a whole?

Reference no: EM1312455

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