(Figure: Home Market I) The home market shown in the figure has imposed a _____ tariff.

Question

Quizplus · Accepted Answer

The home market price without any tariff is $6. When a $3 tariff is imposed, the price in the home market increases to $9 ($6 + $3). At this new price, the quantity demanded by domestic consumers decreases from 14 to 10. The quantity supplied by domestic producers increases from 8 to 12. This means that with the tariff, the home market is now producing and consuming more of the good domestically.

(Figure: Home Market I) the Home Market Shown in the Figure