The figure above shows the market for shirts in Australia, where D is the Australian demand curve and S is the Australian supply curve. The world price is $20 per shirt. Australia imposes a tariff on imported shirts of $4 per shirt.
-In the figure above, the tariff _______ the domestic production of shirts in Australia by _______ per year.

Question

Quizplus · Accepted Answer

A tariff on imported goods makes those goods more expensive, encouraging consumers to buy domestically produced items instead. In this case, the tariff increases domestic production by 8 million per year, as it shifts from producing 12 million shirts without the tariff to 20 million shirts with the tariff.

The Figure Above Shows the Market for Shirts in Australia