The model (graph) below represents a small country trade of good X after the government decided to impose tariffs on import. Consider the case of trade after tariffs. Please answer the following questions: What area(s) represent the gain of surplus to producers? What area(s) represent government revenue? What area(s) represent the loss of surplus to consumers?

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Chapter1: Making Economics Decisions
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The model (graph) below represents a small country trade of good X after the government decided to impose tariffs on import. Consider the case of trade after tariffs. Please answer the following questions:

1. What area(s) represent the gain of surplus to producers?
2. What area(s) represent government revenue?
3. What area(s) represent the loss of surplus to consumers?
4. What area(s) represent consumers surplus?
5. What’s the quantity imported?
6. Describe the impact of a tariff on social welfare. Refer to the graph to support your answer.

### Graph Analysis

The graph provides a detailed view of supply and demand dynamics with the imposition of a tariff.

#### Key Elements of the Graph:

- **Axes**: 
  - The vertical axis is labeled `Price`.
  - The horizontal axis is labeled `Quantity`.

- **Curves**:
  - `S` represents the supply curve.
  - `D` represents the demand curve.

- **Prices**:
  - `P_W` is the world price.
  - `P_W + t` is the world price plus the tariff.

- **Quantities**:
  - `Q_S` is the quantity supplied domestically without tariff.
  - `Q_S,t` is the quantity supplied domestically with tariff.
  - `Q_D,t` is the quantity demanded domestically with tariff.
  - `Q_D` is the quantity demanded domestically without tariff.

- **Areas**:
  - `A, B, C, D, E, F, G`: Different regions on the graph representing various economic surpluses and losses.

From the graph:

- The area **A** represents producers' surplus gain due to the tariff.
- The area **B + D** represents government revenue collected from the tariff.
- The areas **B + D** represent the additional cost consumers incur due to the tariff, while **C + E** represent the deadweight loss.
- The area **A + B + C** represents the consumers' surplus without a tariff.
- The quantity imported after the tariff is the difference between `Q_D,t` and `Q_S,t`.

### Impact of a Tariff on Social Welfare:
The implementation of a tariff has multiple effects on the welfare of a country's economy. It increases producer surplus (Area A) as domestic producers benefit from higher prices. However, it also reduces consumer surplus by the sum of areas B, C, D
Transcribed Image Text:The model (graph) below represents a small country trade of good X after the government decided to impose tariffs on import. Consider the case of trade after tariffs. Please answer the following questions: 1. What area(s) represent the gain of surplus to producers? 2. What area(s) represent government revenue? 3. What area(s) represent the loss of surplus to consumers? 4. What area(s) represent consumers surplus? 5. What’s the quantity imported? 6. Describe the impact of a tariff on social welfare. Refer to the graph to support your answer. ### Graph Analysis The graph provides a detailed view of supply and demand dynamics with the imposition of a tariff. #### Key Elements of the Graph: - **Axes**: - The vertical axis is labeled `Price`. - The horizontal axis is labeled `Quantity`. - **Curves**: - `S` represents the supply curve. - `D` represents the demand curve. - **Prices**: - `P_W` is the world price. - `P_W + t` is the world price plus the tariff. - **Quantities**: - `Q_S` is the quantity supplied domestically without tariff. - `Q_S,t` is the quantity supplied domestically with tariff. - `Q_D,t` is the quantity demanded domestically with tariff. - `Q_D` is the quantity demanded domestically without tariff. - **Areas**: - `A, B, C, D, E, F, G`: Different regions on the graph representing various economic surpluses and losses. From the graph: - The area **A** represents producers' surplus gain due to the tariff. - The area **B + D** represents government revenue collected from the tariff. - The areas **B + D** represent the additional cost consumers incur due to the tariff, while **C + E** represent the deadweight loss. - The area **A + B + C** represents the consumers' surplus without a tariff. - The quantity imported after the tariff is the difference between `Q_D,t` and `Q_S,t`. ### Impact of a Tariff on Social Welfare: The implementation of a tariff has multiple effects on the welfare of a country's economy. It increases producer surplus (Area A) as domestic producers benefit from higher prices. However, it also reduces consumer surplus by the sum of areas B, C, D
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