The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is PW. Assume that all jeans are identical. FIGURE 34- 2
-Refer to Figure 34- 2. Suppose that Canada imposes a tariff of $t per pair of jeans. Canada's consumption will then be at the quantity:

Question

The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is PW. Assume that all jeans are identical.  FIGURE 34- 2
-Refer to Figure 34- 2. Suppose that Canada imposes a tariff of $t per pair of jeans. Canada's consumption will then be at the quantity:

Quizplus · Accepted Answer

When Canada imposes a tariff of $t per pair of jeans, the new domestic supply curve would shift upwards by the amount of the tariff (t). This means that producers would now receive a higher price than before, which would incentivize them to produce more. As a result, the domestic quantity supplied would increase from Q2 to Q4.

Meanwhile, consumers would now face a higher price due to the tariff, which would reduce the quantity demanded. The new domestic demand curve would shift downwards by the amount of the tariff (t) as consumers become less willing to pay for jeans at higher prices. This means that the domestic quantity demanded would decrease from Q3 to Q4.

The quantity at which the new domestic supply and demand curves intersect is Q4, which is the new equilibrium quantity of jeans after the tariff is imposed. Thus, the correct answer is D.

The Diagram Below Shows the Domestic Demand and Supply Curves