The diagram below shows the domestic demand and supply curves for cotton towels in Canada.The prevailing world price of cotton towels is P W .Assume that all cotton towels are identical. FIGURE 33-3
-Refer to Figure 33-3.If Canada imposes a tariff of $t per cotton towel,foreign producers' revenues from their Canadian sales will be equal to the area

Question

The diagram below shows the domestic demand and supply curves for cotton towels in Canada.The prevailing world price of cotton towels is P W .Assume that all cotton towels are identical.  FIGURE 33-3
-Refer to Figure 33-3.If Canada imposes a tariff of $t per cotton towel,foreign producers' revenues from their Canadian sales will be equal to the area

Quizplus · Accepted Answer

When Canada imposes a tariff of $t per cotton towel, the world price increases to PS2U1B1WS2U1B0. The price paid by Canadian consumers increases to PC2D, which is higher than the world price by the amount of the tariff (PC2D = PS2U1B1WS2U1B0 + t). Canadian producers supply QC2 of cotton towels. Imports decline to zero. The foreign producer's revenue from sales into Canada is given by the area of the rectangle HBDC. Since this area equals the price they receive (PS2U1B1WS2U1B0) times the quantity they sell into Canada (QC2), their revenue is HBDC = H.

The Diagram Below Shows the Domestic Demand and Supply Curves