The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2
- According to Figure 21.2,if the world price of wheat is $25 and a tariff of $25 is imposed by the domestic government,the total tariff revenue collected by the government is:

Question

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 
- According to Figure 21.2,if the world price of wheat is $25 and a tariff of $25 is imposed by the domestic government,the total tariff revenue collected by the government is:

Quizplus · Accepted Answer

When a tariff of $25 is imposed by the domestic government, the domestic price of wheat would become $50 ($25 tariff + $25 world price). Consequently, the quantity demanded would decrease to 10 units, and the quantity supplied would increase to 20 units. The tariff revenue would be calculated as ($50-$25)*10 = $250. However, this is not the total tariff revenue collected by the government. Remember that the tariff revenue comes from both domestic and foreign producers, while the question only provides information about the domestic market. Given that the foreign market has a fixed price of $25, it would not export any wheat to the country with $50 tariffs. Thus, the total tariff revenue collected by the government would be $0. Therefore, B is the correct answer.

The Figure Given Below Depicts the Negatively Sloped Demand and Positively