The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supp The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.
-In the figure above, with the tariff Americans buy million shirts per year.

Question

Quizplus · Accepted Answer

With the imposition of the $4 per shirt tariff, the domestic price would increase to $24 per shirt, which is higher than the world price of $20 per shirt. This would result in a decrease in quantity demanded and an increase in quantity supplied domestically. The quantity demanded would decrease to 40 million shirts per year, as shown by the intersection of the domestic demand curve and the new higher price of $24.

The Figure Shows the Market for Shirts in the United