The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.
-In the figure above, the tariff _________U.S. imports of shirts by _________million shirts per year.

Question

Quizplus · Accepted Answer

With the tariff, the price of imported shirts in the U.S. market will increase to $24 per shirt, which is above the world price of $20. As a result, domestic producers will increase their output, and domestic buyers will decrease their purchases of imported shirts. The quantity of imports will decrease by the difference between the quantity demanded at the new higher price and the quantity supplied by domestic producers. This difference is 16 million shirts per year, as shown by the vertical distance between the two supply curves at the $24 price level. Therefore, choice C is correct.

The Figure Shows the Market for Shirts in the United