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Sugar Quotas A Sour Deal For U.S. Consumers U.S. sugar farmers have enjoyed protection from imports since 1789 when Congress enacted the first tariff on imported sugar. The Sugar Act of 1934 gave U.S. farmers an even better deal by creating a quota on the amount of sugar that can be imported into the United States. The Farm Bill of 2018 continued that protection, limiting sugar imports to 1.2 million tons per year-just a fraction of the 11 milion tons Americans consume. As a result of that quota, U.S. sugar prices in early 2020 were about 10 cents a pound higher than world prices. That's great news for America's 4,700 sugar farmers but a sour deal for U.S. consumers and manufacturers, who pay more for all sugar products. U.S. candy producers have cut thousands of jobs and moved manufacturing plants to Canada and elsewhere, where sugar is cheaper. Analysts estimate that 3 manufacturing jobs have been lost for every 1 sugar job saved and consumers are paying $2 billion a year in higher sugar prices.
a. How much more are U.S. consumers paying for the 11 million tons of sugar they consume each year as a result of the quotas on sugar imports? (Hint There are 2,000 pounds in one ton.)

Sagot :

How much more are U.S. Consumer surplus for the 11 million tons of sugar they consume each year as a result of the quotas on sugar imports? =$10.91 billion

Consumer Surplus ΔP = Pmax – Pd, or the price at equilibrium where supply and demand are equal. Pmax = the price a consumer is willing to pay.

=11 million-21.91billion=$10.91 billion

Consumer surplus is a financial estimate of the benefits that consumers receive from market competition. Consumer surplus occurs when consumers pay less for a commodity or service than they would be willing to. It gauges the additional gain that consumers experience as a result of paying less than they otherwise would have been willing to. Consumer surplus and producer excess can be compared. The concept of consumer surplus was developed in 1844 to measure the social benefits of public goods like national highways, canals, and bridges. It has been a vital tool for the study of welfare economics and the formulation of governmental tax policies.

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