Suppose that the United States imposes tariffs on cars manufactured in Europe. As a result, the demand for cars in the U.S. is 100 million cars per year, and the domestic supply is 95 million cars. Further, the government earns $500 million in revenue from the tariff. We can conclude that the import tariff per car is:

Question

Quizplus · Accepted Answer

The import tariff per car is calculated by dividing the total tariff revenue by the number of imported cars. The U.S. demands 100 million cars and supplies 95 million domestically, so it imports 5 million cars. With a tariff revenue of $500 million, the tariff per car is $500 million / 5 million cars = $100.

Suppose That the United States Imposes Tariffs on Cars Manufactured