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 consumer surplus would be

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 consumer surplus would be

Quizplus · Accepted Answer

The imposition of a tariff increases the price of gasoline from $3.50 to $4.00, reducing consumer surplus by the areas representing the loss in consumer welfare due to higher prices and reduced consumption, which is area a + b + c + d + e.

Figure 44 Market for Gasoline in a Small Nation