The following graph shows U.S. demand for and domestic supply of a good. Suppose the world price of the good is $1.00 per unit and a specific tariff of $0.50 per unit is imposed on each unit of imported good. In such a case, the gain in producer surplus as a result of a tariff of $0.50 per unit is represented by the area _____.

Question

The following graph shows U.S. demand for and domestic supply of a good. Suppose the world price of the good is $1.00 per unit and a specific tariff of $0.50 per unit is imposed on each unit of imported good. In such a case, the gain in producer surplus as a result of a tariff of $0.50 per unit is represented by the area _____.
The following graph shows U.S. demand for and domestic supply of a good. Suppose the world price of the good is $1.00 per unit and a specific tariff of $0.50 per unit is imposed on each unit of imported good. In such a case, the gain in producer surplus as a result of a tariff of $0.50 per unit is represented by the area _____. A) c + h B) h C) c D) c + g E) g

Quizplus · Accepted Answer

The area c represents the increase in domestic production due to the tariff, resulting in an increase in producer surplus. Therefore, the gain in producer surplus as a result of the tariff is represented by the area c. The other options include areas that represent gains for consumers, which are not relevant in this case.

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