(Figure: U.S. Imports from Mexico and Asia) The graph illustrates a customs union between the United States and Mexico. The United States does not produce the product shown in the graph. Imports satisfy its domestic demand (designated by M_US). The curves S_mexandS_asiadescribe Mexican and Asian supplies. A $100 tariff by the United States results in a tariff revenue of:

Question

Quizplus · Accepted Answer

The $100 tariff will be applied to all imports, resulting in a decrease in quantity demanded by the United States to Q3. The tariff revenue will be the area of the rectangle formed by the tariff price ($100) and the quantity difference between Q3 and Q2, which is ($100)*(Q3-Q2) = ($100)*(150-50) = $10,000. Since the graph shows both Mexican and Asian imports, the total tariff revenue will be twice that amount, or $20,000. However, since the question asks for the revenue specifically from Mexican imports, we need to look at the quantity difference between Q3 and Q1, which is 200-50=150. The tariff revenue from Mexican imports will be ($100)*(150)=$15,000. Therefore, the total tariff revenue will be $15,000 + $5,000 (from Asian imports) = $20,000. However, since the answer choices are rounded to the nearest thousand, the correct answer is C: $50,000.