The following figure shows the domestic demand and supply curves for a good.With free trade,the price of the good in the domestic market is P 3 .The government introduces a 5% tariff in the market which raises the domestic price to P 2 .
Figure 7-1

-Refer to Figure 7-1.With the imposition of the tariff,the change in consumer surplus is equal to _____.

Question

The following figure shows the domestic demand and supply curves for a good.With free trade,the price of the good in the domestic market is P 3 .The government introduces a 5% tariff in the market which raises the domestic price to P 2 .
Figure 7-1
 
-Refer to Figure 7-1.With the imposition of the tariff,the change in consumer surplus is equal to _____.

Quizplus · Accepted Answer

The change in consumer surplus is equal to the area A + C in the figure. This is the difference between the original consumer surplus (P₃GL) and the new consumer surplus with the tariff (P₂HK). Therefore, the correct choice is C (-P₂HKP₃).

The Following Figure Shows the Domestic Demand and Supply Curves