(Figure: The Home Monopolist's Market) The graph shows a home monopolist market with free trade and with the imposition of a tariff. With the tariff, how much does the home government collect in tariff revenue?

Question

Quizplus · Accepted Answer

With the imposition of the tariff, the price increases from $8 to $10, and the quantity demanded decreases from 800 to 600. The home producer now sells 400 units ($10 - $6 = $4 profit per unit). The tariff revenue is calculated as (tariff rate * quantity of imports) which is ($4 * 400 = $1,600). Therefore, the correct answer is (B) $2,800, which is the sum of the producer surplus ($1,600) and the tariff revenue ($1,200).

(Figure: the Home Monopolist's Market) the Graph Shows a Home