Policymakers in a small country impose a specific tariff of $2.00 per unit. Prior to the tariff the country imported 10,000 units and after the tariff 8,000 units. The redistributive effects of the tariff are:

Question

Quizplus · Accepted Answer

The total revenue collected from the tariff would be (2.00 per unit) x (8,000 units) = $16,000.

Since the quantity imported decreased after the imposition of the tariff, it can be concluded that domestic producers benefited from the tariff by having an increase in domestic production. Therefore, option B and D can be ruled out.

The $16,000 in revenue collected from the tariff is ultimately paid by domestic consumers through higher prices. Hence, the full amount of the tariff is shifted onto domestic consumers in the form of higher prices. Therefore, option C is the correct answer.

Policymakers in a Small Country Impose a Specific Tariff of $2.00