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Figure: World Imports
-(Figure: World Imports) Refer to the figure. The imposition of a $20 tariff would generate a value of lost gains from trade of:

Question

Use the following to answer questions:
Figure: World Imports 
-(Figure: World Imports) Refer to the figure. The imposition of a $20 tariff would generate a value of lost gains from trade of:

Quizplus · Accepted Answer

The value of lost gains from trade due to the imposition of a $20 tariff is equal to the shaded triangle in the figure. This triangle has a height of $45 (difference between world price and domestic supply price) and a base of 4 units. Therefore, the area of the triangle, which represents the lost gains from trade, is ($45 x 4)/2 = $90.

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