WORK IT OUT

Effects of Trade Barriers
Let’s look carefully at the effects of tariffs or quotas. If the U.S. government imposes a tariff or quota sufficient to

eliminate trade with Brazil, two things occur: U.S. consumers pay a higher price and therefore buy a smaller

quantity of sugar. U.S. producers obtain a higher price and they sell a larger quantity of sugar. We can measure

the effects of a tariff on producers and consumers in the United States using two concepts that we developed in

Demand, Supply, and Efficiency: consumer surplus and producer surplus.

FIGURE 20.4 U.S. Sugar Supply and Demand When there is free trade, the equilibrium is at point A. When there

is no trade, the equilibrium is at point E.

Step 1. Look at Figure 20.4, which shows a hypothetical version of the demand and supply of sugar in the United

States.
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