The domestic market for calculators is perfectly competitive and is in equilibrium. Domestic demand is given by $Q ^ { d } = 100 - P$ and domestic supply is given by $Q ^ { s } = 4 P$. The world price for calculators is $\$ 10$. Now, a tariff of $\$ 10$ is imposed on all imports. How much revenue does this policy generate for the government?
A) 0
B) 10
C) 30
D) 50

Question

Quizplus · Accepted Answer

The domestic equilibrium price without trade is found by setting $Q^d = Q^s$, which gives $100 - P = 4P$, leading to $P = 20$. At this price, no imports occur because the domestic price is higher than the world price (\$10). With a \$10 tariff, the effective price of imports becomes \$20, equal to the domestic price, so no imports occur, and thus no tariff revenue is generated.

The Domestic Market for Calculators Is Perfectly Competitive and Is Qd=100−PQ ^ { d } = 100 - PQd=100−P

The Domestic Market for Calculators Is Perfectly Competitive and Is $Q ^ { d } = 100 - P$