Suppose the nation of Isoland is an importer of textiles and is looking for a way to raise government revenue. The following graph shows the effect of a tariff on textile imports.
Suppose the nation of Isoland is an importer of textiles and is looking for a way to raise government revenue. The following graph shows the effect of a tariff on textile imports.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![8. Problems and Applications Q8
Suppose the nation of Isoland is an importer of textiles and is looking for a way to raise government revenue. The following graph shows the effect of
a tariff on textile imports.
Supply
Demand
3.
3.
Quantty of Tedies
Price of Textiles](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F26066331-668a-4372-bbc9-da366e6096ae%2F77380079-e529-44ef-a42c-db5aad34ad7a%2Fvaxi1ir_processed.jpeg&w=3840&q=75)
Transcribed Image Text:8. Problems and Applications Q8
Suppose the nation of Isoland is an importer of textiles and is looking for a way to raise government revenue. The following graph shows the effect of
a tariff on textile imports.
Supply
Demand
3.
3.
Quantty of Tedies
Price of Textiles
![Having rejected a tariff on textiles (a tax on imports), the president of Isoland is now considering the same-sized tax on textile consumption (indluding
both imported and domestically produced textiles).
Under a textile consumption tax, the quantity of textiles consumed in Isoland is
and the quantity produced in Isoland is
The following table shows the effect of an import tariff on the nation of Isoland.
Complete the remaining columns of the following table by indicating the effect of the same-sized tax on textile consumption.
Under Tariff
Under Consumption Tax
Before Tarif or Tax
After
Change
After
Change
A +B+C+D +E+F
A+B
- (C +D+E+F)
Consumer
Surplus
Producer Surplus
G.
Government
None
E
4E
Revenue
Total Surplus
A+B4C+D +E+F+G A+B C+E+C
(D+F)
Compared to the tariff, the consumption tax raises
revenue for the government and has
deadweight
loss associated with it.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F26066331-668a-4372-bbc9-da366e6096ae%2F77380079-e529-44ef-a42c-db5aad34ad7a%2Fs0pswr_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Having rejected a tariff on textiles (a tax on imports), the president of Isoland is now considering the same-sized tax on textile consumption (indluding
both imported and domestically produced textiles).
Under a textile consumption tax, the quantity of textiles consumed in Isoland is
and the quantity produced in Isoland is
The following table shows the effect of an import tariff on the nation of Isoland.
Complete the remaining columns of the following table by indicating the effect of the same-sized tax on textile consumption.
Under Tariff
Under Consumption Tax
Before Tarif or Tax
After
Change
After
Change
A +B+C+D +E+F
A+B
- (C +D+E+F)
Consumer
Surplus
Producer Surplus
G.
Government
None
E
4E
Revenue
Total Surplus
A+B4C+D +E+F+G A+B C+E+C
(D+F)
Compared to the tariff, the consumption tax raises
revenue for the government and has
deadweight
loss associated with it.
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