Question

Suppose the nation of Sugarland consists of 50,000 households, 10 of whom are sugar producers. Arguing that the sugar industry is vital to the national economy, sugar producers propose an import tariff. The loss in consumer surplus due to the tariff will be $100,000 per year. The total gain in producer surplus will be $25,000 per year.What is the gross cost per household per year of the proposed policy? Round your answer to the nearest dollar.

Answer 1

Answer:

$2 per household per year

Explanation:

Data provided in the question

Number of households who are sugar producers = 50,000

Loss in consumer surplus = $100,000

Total gain in producer surplus = $25,000

Now considering the above information, the gross cost per household per year is

= Loss in consumer surplus ÷ Number of households who are sugar producers

= $100,000 ÷ 50,000 households

= $2 per household per year