Figure 7.2

Suppose the Canadian government imposes a $0.40 per pound tariff on rice imports. Figure 7.2 shows the impact of this tariff.
-Refer to Figure 7.2.The loss in domestic consumer surplus as a result of the tariff is equal to the area

Question

Figure 7.2
  
Suppose the Canadian government imposes a $0.40 per pound tariff on rice imports. Figure 7.2 shows the impact of this tariff.
-Refer to Figure 7.2.The loss in domestic consumer surplus as a result of the tariff is equal to the area

Quizplus · Accepted Answer

The loss in domestic consumer surplus is equal to the area C+D+E+F. This is because this area represents the increase in price that consumers have to pay due to the tariff, which reduces their welfare. A and B represent gains to producers and government revenue respectively, while B alone is not the correct choice as it only represents producer surplus.

Figure 7.2 Suppose the Canadian Government Imposes a $0.40 Per Pound Tariff