The domestic market for calculators is perfectly competitive and is in equilibrium. Domestic demand is given by Q^d = 100 - P and domestic supply is given by Q^s = 4P. The world price for calculators is $10. Now, a tariff of $10 is imposed on all imports. How much revenue does this policy generate for the government? A) 0 B) 10 C) 30 D) 50

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Quizplus · Accepted Answer

The domestic equilibrium price without trade is $20 (where Q^d = Q^s). With a world price of $10, domestic producers supply 40 units (Q^s = 4*10), and domestic demand is 90 units (Q^d = 100-10), leading to 50 units imported. With a $10 tariff, the effective price becomes $20, eliminating imports (since domestic supply meets demand at this price), thus generating $0 in tariff revenue.

The Domestic Market for Calculators Is Perfectly Competitive and Is