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Figure: A Tariff on Imports
-(Figure: A Tariff on Imports) Refer to the figure. Suppose the government intervenes with a $2 tariff; the total value of deadweight loss as a result of the tariff is:
A) $150 million.
B) $200 million.
C) $400 million.
D) $550 million.

Question

Use the following to answer questions:
Figure: A Tariff on Imports 
-(Figure: A Tariff on Imports) Refer to the figure. Suppose the government intervenes with a $2 tariff; the total value of deadweight loss as a result of the tariff is:
A) $150 million. 
B) $200 million. 
C) $400 million. 
D) $550 million.

Quizplus · Accepted Answer

The deadweight loss is the triangle below the demand curve and above the supply curve. The height of the triangle is $2 and the base is 100 million units. So the area of the triangle is 1/2 * 2 * 100 million = $100 million. The total value of deadweight loss is twice this, or $200 million.

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