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 a tariff on textile imports. Price of Textiles C G 1 I I I 0₂² Total Surplus D I Consumer Surplus Producer Surplus Government Revenue I B E I IF I I I I 002 Quantity of Textiles Supply Having rejected a tariff on textiles (a tax on imports), the president of Isoland is now considering the same-sized tax on textile consumption (includ both imported and domestically produced textiles). Demand Under a textile consumption tax, the quantity of textiles consumed in Isoland will be, quantity produced in Isoland will be the quantity produced under a tariff. The following table shows the effect of an import tariff on the nation of Isoland. I Complete the remaining columns of the following table by indicating the effect of the same-sized tax on textile consumption. Under Tariff Compared to the consumption tax, the tariff raises loss associated with it. Before Tariff or Tax A+B+C+D+E+F G None A+B+C+D+E+F+G the quantity consumed under a tariff, and th After A+B C+G E A+B+C+E+G Change -(C+D+E+F) +C +E -(D+F) Under Consumption Tax After Change revenue for the government and has Y Y deadwe
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 a tariff on textile imports. Price of Textiles C G 1 I I I 0₂² Total Surplus D I Consumer Surplus Producer Surplus Government Revenue I B E I IF I I I I 002 Quantity of Textiles Supply Having rejected a tariff on textiles (a tax on imports), the president of Isoland is now considering the same-sized tax on textile consumption (includ both imported and domestically produced textiles). Demand Under a textile consumption tax, the quantity of textiles consumed in Isoland will be, quantity produced in Isoland will be the quantity produced under a tariff. The following table shows the effect of an import tariff on the nation of Isoland. I Complete the remaining columns of the following table by indicating the effect of the same-sized tax on textile consumption. Under Tariff Compared to the consumption tax, the tariff raises loss associated with it. Before Tariff or Tax A+B+C+D+E+F G None A+B+C+D+E+F+G the quantity consumed under a tariff, and th After A+B C+G E A+B+C+E+G Change -(C+D+E+F) +C +E -(D+F) Under Consumption Tax After Change revenue for the government and has Y Y deadwe
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text: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.
Price of Texties
C
G
I
I
I
Q8,1
Total Surplus
D
I
I
Consumer Surplus
Producer Surplus
Government Revenue
B
I
I
I
I
E
I
IF
I
!
I
I
Op.2
Quantity of Textles
Supply
Demand
Having rejected a tariff on textiles (a tax on imports), the president of Isoland is now considering the same-sized tax on textile consumption (including
both imported and domestically produced textiles).
I
I
Under a textile consumption tax, the quantity of textiles consumed in Isoland will be
quantity produced in Isoland will be
the quantity produced under a tariff.
The following table shows the effect of an import tariff on the nation of Isoland.
P.
Compared to the consumption tax, the tariff raises
loss associated with it.
Complete the remaining columns of the following table by indicating the effect of the same-sized tax on textile consumption.
Under Tariff
Before Tariff or Tax
A+B+C+D+E+F
G
None
A+B+C+D+E+F+G
the quantity consumed under a tariff, and the
After
A+B
C+G
E
A+B+C+E+G
Change
- (C+D+E+F)
+C
+E
-(D+F)
Under Consumption Tax
After
Change
revenue for the government and has
PEPINI
deadweight
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