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.If the tariff was replaced by a quota which limited rice imports to 16 thousand kilograms, the amount of revenue received by rice importers would equal

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.If the tariff was replaced by a quota which limited rice imports to 16 thousand kilograms, the amount of revenue received by rice importers would equal

Quizplus · Accepted Answer

The quota limits the quantity of rice that can be imported, so the price will rise to the world price of $1.2 per kilogram. The revenue received by rice importers will be equal to the difference between the domestic price and the world price multiplied by the quantity of rice imported. In this case, the revenue will be equal to ($1.2 - $0.8) x 16,000 = $6.4 thousand.

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