The diagram below shows the domestic demand and supply curves for cotton towels in Canada.The prevailing world price of cotton towels is PW.Assume that all cotton towels are identical.
FIGURE 34- 3
-Refer to Figure 34- 3.If Canada imposes a tariff of $t per cotton towel,Canadian towel producers' revenues will be equal to the amount

Question

The diagram below shows the domestic demand and supply curves for cotton towels in Canada.The prevailing world price of cotton towels is PW.Assume that all cotton towels are identical.
  FIGURE 34- 3
-Refer to Figure 34- 3.If Canada imposes a tariff of $t per cotton towel,Canadian towel producers' revenues will be equal to the amount

Quizplus · Accepted Answer

When a tariff of $t is imposed, the domestic price of cotton towels will increase to PW + t. As a result, domestic producers will supply Q2Q1 quantity of towels and domestic demand will decrease to Q2Q3. Imports will decrease to Q1Q3 - Q2Q3. The revenue of domestic producers will be equal to the area A + B + E + F + G, which represents the producer surplus.

The Diagram Below Shows the Domestic Demand and Supply Curves