A small country is considering imposing a tariff on imported wine at the rate of $5 per bottle. Economists have estimated the following based on this tariff amount: World price of wine (free trade): $20 per bottle Domestic production (free trade): 500,000 bottles Domestic production (after tariff): 600,000 bottles Domestic consumption (free trade): 750,000 bottles Domestic consumption (after tariff): 650,000 bottles Draw a demand and supply curve for the country’s wine market to show the effects of the tariff. Find the change in consumer surplus, producer surplus, and government revenue resulting from the tariff.
A small country is considering imposing a tariff on imported wine at the rate of $5 per bottle. Economists have estimated the following based on this tariff amount: World price of wine (free trade): $20 per bottle Domestic production (free trade): 500,000 bottles Domestic production (after tariff): 600,000 bottles Domestic consumption (free trade): 750,000 bottles Domestic consumption (after tariff): 650,000 bottles Draw a demand and supply curve for the country’s wine market to show the effects of the tariff. Find the change in consumer surplus, producer surplus, and government revenue resulting from the tariff.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A small country is considering imposing a tariff on imported wine at the rate of $5 per bottle. Economists have estimated the following based on this tariff amount:
World
Domestic production (free trade): 500,000 bottles
Domestic production (after tariff): 600,000 bottles
Domestic consumption (free trade): 750,000 bottles
Domestic consumption (after tariff): 650,000 bottles
- Draw a
demand and supply curve for the country’s wine market to show the effects of the tariff. - Find the change in
consumer surplus ,producer surplus , and government revenue resulting from the tariff.
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