Refer to the information provided in Figure 33.4 below to answer the question(s) that follow. Figure 33.4
-Refer to Figure 33.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. After the tariff is imposed
A) domestic production and consumption will increase by 50 wallets and domestic consumption will increase by 50 wallets.
B) domestic production will increase by 150 wallets and domestic consumption will decrease by 250 wallets.
C) domestic production will increase by 100 wallets and domestic consumption will decrease by 100 wallets.
D) domestic production will increase by 50 wallets and domestic consumption will decrease by 50 wallets.

Question

Refer to the information provided in Figure 33.4 below to answer the question(s) that follow.  Figure 33.4
-Refer to Figure 33.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. After the tariff is imposed
A) domestic production and consumption will increase by 50 wallets and domestic consumption will increase by 50 wallets. 
B) domestic production will increase by 150 wallets and domestic consumption will decrease by 250 wallets. 
C) domestic production will increase by 100 wallets and domestic consumption will decrease by 100 wallets. 
D) domestic production will increase by 50 wallets and domestic consumption will decrease by 50 wallets.

Quizplus · Accepted Answer

After the tariff is imposed, the domestic price of the leather wallet will increase from $10 to $15. This increase in price will make it more profitable for domestic producers to produce the leather wallets. Hence, domestic production will increase. However, the higher price will discourage domestic consumers from buying the leather wallets. Hence, domestic consumption will decrease. The increase in production will be less than the decrease in consumption, resulting in a net increase of 50 wallets in domestic production and a decrease of 50 wallets in domestic consumption. Therefore, the correct choice is D.

Refer to the Information Provided in Figure 33