Figure 4.4 Market for Gasoline in a Small Nation

-Figure 4.4 represents the market for gasoline in a small nation.The free trade world price of gasoline is $3.50.Suppose this small nation imposes a tariff on gasoline of $.50 per gallon.The change in producer surplus would be
A) area a + b
B) area a
C) area a + b + f
D) area a + b + f + g + h

Question

Figure 4.4 Market for Gasoline in a Small Nation
 
-Figure 4.4 represents the market for gasoline in a small nation.The free trade world price of gasoline is $3.50.Suppose this small nation imposes a tariff on gasoline of $.50 per gallon.The change in producer surplus would be
A) area a + b 
B) area a 
C) area a + b + f 
D) area a + b + f + g + h

Quizplus · Accepted Answer

The imposition of a tariff increases the domestic price, which benefits domestic producers by allowing them to sell more at a higher price. The change in producer surplus is represented by the area a, which is the gain in producer surplus due to the higher price and increased quantity sold domestically.

Figure 44 Market for Gasoline in a Small Nation