The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is P W . Assume that all jeans are identical.
FIGURE 34- 2
-Refer to Figure 34- 2. If Canada initially has no tariff on denim jeans but then imposes a tariff of $t per pair of jeans, Canada's imports will

Question

The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is P W . Assume that all jeans are identical.
  FIGURE 34- 2
-Refer to Figure 34- 2. If Canada initially has no tariff on denim jeans but then imposes a tariff of $t per pair of jeans, Canada's imports will

Quizplus · Accepted Answer

When Canada imposes a tariff on imported denim jeans, the domestic price will increase to P'D. At the new price, domestic producers will increase production to QS1U1B12S1U1B0, while domestic demand will decrease to QD1. The quantity of jeans imported will decrease to (QS1U1B14S1U1B0S1U1B1 - QS1U1B12S1U1B0), which is equivalent to (QS1U1B14S1U1B0S1U1B1 - QD1). Therefore, imports will decrease from (QS1U1B15S1U1B0 - QS1U1B11S1U1B0) to (QS1U1B14S1U1B0S1U1B1 - QS1U1B12S1U1B0).

The Diagram Below Shows the Domestic Demand and Supply Curves