Question: In March 2002, then President George W. Bush put a tariff on imported steel as a means of protecting the domestic steel industry. In February, before the tariff went into effect, the U.S. produced 7.4 million metric tons of crude steel and imported about 2.8 million metric tons of steel products at an average price of $363 per metric ton. Two months later, after the tariff was in effect, U.S. production increased to 7.9 million metric tons. The volume of imported steel fell to about 1.7 million metric tons, but the price of the imported steel rose to about $448 per metric ton. The following supply and demand diagram shows this situation (along with an estimated no-trade domestic equilibrium at a price of $625 per metric ton and a quantity of 8.9 million metric tons).
Determine which areas on the graph represent each of the following:
a. The increase in producer surplus gained by U.S. steel producers as a result of the tariff
b. The loss in consumer surplus suffered by U.S. steel consumers as a result of the tariff
c. The revenue earned by the government because of the tariff
d. The gains from trade that are lost (the deadweight loss) because of the tariff