The United States currently imports all of its coffee. Suppose the annual demand for coffee by U. S. consumers is given by the demand curve Qequals=240240minus-55 P, where Q is quantity (in millions of pounds) and P is the market price per pound of coffee. World producers can harvest and ship coffee to U. S. distributors at a constant marginal (equals= average) cost of $66 per pound. U. S. distributors can in turn distribute coffee for a constant $11 per pound. The U. S. coffee market is competitive. Congress is considering a tariff on coffee imports of $22 per pound. A) If there is no tariff, how much do consumers pay for a pound of coffee? What is the quantity demanded? B) If the tariff is imposed, how much will consumers pay for a pound of coffee? What is the quantity demanded? C) Calculate lost consumer surplus. D) Calculate 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?
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