Refer to the information provided in Figure 20.4 below to answer the question(s) that follow. Figure 20.4
-Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. If the tariff is raised so that it now equals $10, tariff revenue in this country will be
A) $0.
B) $1,000.
C) $2,000.
D) $3,000.

Question

Refer to the information provided in Figure 20.4 below to answer the question(s) that follow.  Figure 20.4
-Refer to Figure 20.4. The domestic price of a leather wallet is $20. With free trade the price of a leather wallet is $10 and after a tariff is imposed the price is $15. If the tariff is raised so that it now equals $10, tariff revenue in this country will be
A) $0. 
B) $1,000. 
C) $2,000. 
D) $3,000.

Quizplus · Accepted Answer

When the tariff equals the difference between the domestic price and the world price ($10 in this case), it effectively prohibits imports because the price with the tariff equals the domestic price, resulting in no imports and thus no tariff revenue.

Refer to the Information Provided in Figure 20