The demand for microwaves in a certain country is given by: D = 8,000 - 30P, where P is the price of a microwave. Supply by domestic microwave producers is: S = 4,000 + 10P. If this economy opens to trade while the world price of a microwave is $50, and the government imposes a tariff of $30 per microwave, then the tariff revenue collected by the government will be ________.

Question

Quizplus · Accepted Answer

The new domestic price for microwaves will be $80. At that price, the domestic quantity demanded is 8,000 - 30(80)= 5,600, and the domestic quantity supplied is 4,000 - 10(80)= 4,800, implying that the country will import 800 microwaves. This means that total tariff revenue will be $30 × 800 = $24,000.

The Demand for Microwaves in a Certain Country Is Given