Exhibit 19-5
-If the country illustrated in Exhibit 19-5 is initially trading without restrictions at a world price of $1.00, the loss of consumer surplus as a result of a tariff of $0.50 per unit is represented by area

Question

Exhibit 19-5 
-If the country illustrated in Exhibit 19-5 is initially trading without restrictions at a world price of $1.00, the loss of consumer surplus as a result of a tariff of $0.50 per unit is represented by area

Quizplus · Accepted Answer

The loss of consumer surplus is represented by the area c + i + e + f, which is equal to the deadweight loss. This is because consumers are now paying a higher price for the imported good, resulting in a decrease in the quantity demanded and a loss of consumer surplus. The areas b and d represent the gain in producer surplus due to the tariff, but this gain is less than the loss in consumer surplus, resulting in a net welfare loss. Therefore, C is the best choice.

Exhibit 19-5 -If the Country Illustrated in Exhibit 19-5 Is Initially Trading