The United States imports beer from Germany at large volumes. The graph below
shows the supply and demand for beer in the United States. The country currently
imports at a world price of $15.
a) Suppose the country imposes a tariff of $3. The price for consumers rises to
$17. Graphically show how this affects the market. (Qs = 10, Qd = 15.)
b) What is the percentage rate of the tariff?
c) Who will pay the tariff? (How is the extra $3 distributed?)
d) Calculate the gains and losses to consumers, domestic producers, foreign
producers, and the government.
e) Calculate the deadweight loss. Was this a good tariff for the United States?
f) Aluminum cans are often used to package beer. If the country were to
impose a tariff on aluminum cans, would the percentage rate of this tariff be
higher or lower than the one you calculated in b)? Explain.
Fig: 1