Exhibit 19-3

-If the country illustrated in Exhibit 19-3 is initially trading without restrictions at a world price of $1.00,the gain in producer surplus as a result of a tariff of $0.50 per unit is represented by area

Question

Exhibit 19-3
 
-If the country illustrated in Exhibit 19-3 is initially trading without restrictions at a world price of $1.00,the gain in producer surplus as a result of a tariff of $0.50 per unit is represented by area

Quizplus · Accepted Answer

The gain in producer surplus due to a tariff is represented by the area that shows the increase in domestic producer prices, which is typically the area between the world price and the new price after the tariff, up to the domestic supply curve. In this case, it is area c.

Exhibit 19-3 -If the Country Illustrated in Exhibit 19-3 Is Initially Trading