As an activity answer the following questions based on the d

As an activity, answer the following questions based on the diagram below for a smal country imposing a tariftf: Price Pw+to $15 World price+ tariff Pw $10 World price 20 50 100 135 Quantity a. What is the quantity of widget imports with free trade? b. What is the quantity of widget imports with a tariff of $5 per unit of widget import? c. What is the change in consumer and producer surplus with the $3 tariff per unit? d. What is the tariff revenue received by the government as a result of the $3 tariff per unit? Click here for answers: hide a. 115 units b. 50 units c. Change in consumer surplus- $587.50, change in producer surplus $175 d. $250

Solution

a) demand -supply = 135-20 =115

b)with tariff :demand -supply = 100-50 =50

c) area of a =0.5(50+20)(5)

d) area of c =(100-50)(5) =250