Figure 9-6

-Refer to Figure 9-6.When the tariff is imposed,domestic consumers
A) lose by $500.
B) lose by $900.
C) gain by $500.
D) gain by $900.

Question

Figure 9-6
 
-Refer to Figure 9-6.When the tariff is imposed,domestic consumers
A) lose by $500. 
B) lose by $900. 
C) gain by $500. 
D) gain by $900.

Quizplus · Accepted Answer

When the tariff is imposed, the domestic price increases from $6 to $8. This means that domestic consumers now pay $2 more per unit. Since they buy 500 units, their total loss is $2 x 500 = $1000. However, the government earns $100 per unit from the tariff, which equals $100 x 500 = $50,000. Hence, the net loss to the domestic economy is $50,000 - $1000 = $49,000. Therefore, domestic consumers lose by $900.

Figure 9-6 -Refer to Figure 9-6.When the Tariff Is Imposed,domestic Consumers