If the free trade price is IP and this country imposes a trade tariff of $6, the loss to the economy as a result of this tariff is represented by (a) area (a) in this graph (b) area (b) in this graph (c) areas (c) + (d) (d) areas (b) + (c) + (d) + (e) (e) areas (a) + (b) + (c) + (d)
If the free trade price is IP and this country imposes a trade tariff of $6, the loss to the economy as a result of this tariff is represented by (a) area (a) in this graph (b) area (b) in this graph (c) areas (c) + (d) (d) areas (b) + (c) + (d) + (e) (e) areas (a) + (b) + (c) + (d)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
If the free trade price is IP and this country imposes a trade tariff of $6, the loss to the economy as a result of this tariff is represented by
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(a) area (a) in this graph |
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(b) area (b) in this graph |
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(c) areas (c) + (d) |
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(d) areas (b) + (c) + (d) + (e) |
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(e) areas (a) + (b) + (c) + (d) |
Transcribed Image Text:25
20
15
10
5
0
P
a
0 3
U
6
e
b
O
S
9 12 15 18 21
-P*
-IP
-D
24
Q
Expert Solution
Step 1: Describe the problem
The imposition of a tariff on imports will increase the price faced in domestic countries.
It can be seen that the free trade price line shifts upward from 'IP' to 'P*' after the imposition of tariffs.
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