The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 35.2 According to Figure 35.2, if the world price of wheat is $25 and a tariff of $10 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 35.2  According to Figure 35.2, if the world price of wheat is $25 and a tariff of $10 is imposed by the domestic government, the total tariff revenue collected by the government is:

Quizplus · Accepted Answer

At the world price of $25, the domestic quantity demanded is Qd1 and the domestic quantity supplied is Qs1.

When a tariff of $10 is imposed, the domestic price increases to $35. At this price, the domestic quantity demanded decreases to Qd2 and the domestic quantity supplied increases to Qs2.

The amount of wheat imported decreases from (Qd1-Qs1) to (Qd2-Qs2), which is also known as the amount of tariffed imports.

Therefore, the total tariff revenue collected by the government is:

Tariff revenue = Tariff rate * tariffed imports
= $10 * (Qd1-Qs1) - (Qd2-Qs2)
= $10 * (100-60) - (80-40)
= $2000

So, the correct answer is D) $2,000.

The Figure Given Below Depicts the Negatively Sloped Demand and Positively