The diagram below shows supply and demand curves for bicycles in the domestic Canadian market.Assume that all bicycles are identical. FIGURE 33-4
-Refer to Figure 33-4.Suppose the world price of bicycles is $200 and Canada has in place a 50% tariff on this good.The deadweight loss to the Canadian economy resulting from this tariff is ________ per year.

Question

The diagram below shows supply and demand curves for bicycles in the domestic Canadian market.Assume that all bicycles are identical.  FIGURE 33-4
-Refer to Figure 33-4.Suppose the world price of bicycles is $200 and Canada has in place a 50% tariff on this good.The deadweight loss to the Canadian economy resulting from this tariff is ________ per year.

Quizplus · Accepted Answer

The deadweight loss from a tariff is calculated as the loss in consumer surplus that is not offset by gains in producer surplus or government revenue. Given the world price and the tariff rate, the deadweight loss can be determined from the supply and demand curves in Figure 33-4, which is $1.0 million per year.

The Diagram Below Shows Supply and Demand Curves for Bicycles