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The Following Figure Shows the Domestic Demand and Supply Curves

Question 28

Multiple Choice

The following figure shows the domestic demand and supply curves for a good. With free trade, the price of the good in the domestic market is P3. The government introduces a 5% tariff in the market which raises the domestic price to P2.
Figure 7-1
The following figure shows the domestic demand and supply curves for a good. With free trade, the price of the good in the domestic market is P<sub>3</sub>. The government introduces a 5% tariff in the market which raises the domestic price to P<sub>2</sub>. Figure 7-1    -Refer to Figure 7-1. With the imposition of the tariff, the change in producer surplus is equal to: A)  a loss measured by the area of P<sub>1</sub>FGP<sub>2</sub>. B)  a gain measured by the area of P<sub>1</sub>FJP<sub>3</sub>. C)  a gain measured by the area of P<sub>2</sub>GJP<sub>3</sub>. D)  a loss measured by the area of P<sub>3</sub>JA0. E)  a gain measured by the area of P<sub>1</sub>FC0.
-Refer to Figure 7-1. With the imposition of the tariff, the change in producer surplus is equal to:


A) a loss measured by the area of P1FGP2.
B) a gain measured by the area of P1FJP3.
C) a gain measured by the area of P2GJP3.
D) a loss measured by the area of P3JA0.
E) a gain measured by the area of P1FC0.

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