The figure given below shows the U.S. market for imported wine. For simplicity, we consider export supply curves to be flat. Chilean wine is available for $480 per barrel and French wine is available for $420 per barrel.
Suppose the United States has a tariff of $80 per barrel on imported wine. Then, the U.S. joins a free trade area with Chile. How much will the U.S. government tariff revenue change (as a result of joining the free trade area) ?
A) Increase by $50 million
B) Decrease by $250 million
C) Increase by $600 million
D) Decrease by $800 million
Correct Answer:
Verified
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