In the absence of international trade, assume that the equilibrium price and quantity of motorcycles in Canada is $14,000 and 10 units respectively. Assuming that Canada is a small country that is unable to affect the world price of motorcycles, suppose its market is opened to international trade. As a result, the price of motorcycles falls to $12,000 and the total quantity demanded rises to 14 units; out of this total, 6 units are produced in Canada while 8 units are imported. Now assume that the Canadian government levies an import tariff of $1,000 on motorcycles. With the tariff, 8 units are produced in Canada and quantity demanded is 12 units.
-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 consumer surplus would be
A) $15.
B) $12.50.
C) $27.50.
D) $57.50.

Question

Quizplus · Accepted Answer

The change in consumer surplus is calculated by the change in price due to the tariff multiplied by the quantity of gasoline consumed. The tariff increases the price by $0.50, and assuming the quantity remains constant, the change in consumer surplus is $0.50 multiplied by the quantity, which is $27.50.

In the Absence of International Trade, Assume That the Equilibrium