Scenario: Suppose the world price is $2 per bushel, and U.S. wheat growers are dissatisfied with the level of wheat imports into the United States. They lobby Congress for a $1 per bushel tariff on imported wheat. The following figure shows the U.S. wheat market.

-Refer to the scenario above.The decrease in consumer surplus resulting from the tariff is given by which area in the figure?

Question

Scenario: Suppose the world price is $2 per bushel, and U.S. wheat growers are dissatisfied with the level of wheat imports into the United States. They lobby Congress for a $1 per bushel tariff on imported wheat. The following figure shows the U.S. wheat market.
 
-Refer to the scenario above.The decrease in consumer surplus resulting from the tariff is given by which area in the figure?

Quizplus · Accepted Answer

The decrease in consumer surplus resulting from the tariff is given by the area J + K + C + D + E. This is because, with the imposition of tariff, the price of wheat in the domestic market increases from $2 to $3 per bushel (world price + tariff). As a result, the domestic quantity demanded decreases from Q1 to Q2 and the domestic quantity supplied increases from Q1 to Q3. The decrease in quantity demanded results in the loss of consumer surplus equal to the areas J + K + C, while the increase in quantity supplied results in the gain of producer surplus equal to areas D + E. The total loss in consumer surplus is the sum of J + K + C + D + E.

Scenario: Suppose the World Price Is $2 Per Bushel, and U.S