Suppose that Australia imposes a tariff on imported beef. If the increase in producer surplus is $100 million, the increase in tariff revenue is $200 million, and the reduction in consumer surplus is $500 million, the deadweight loss of the tariff is $300 million.

Question

Quizplus · Accepted Answer

The deadweight loss of the tariff is calculated as the reduction in consumer surplus minus the sum of the increase in producer surplus and the increase in tariff revenue. Therefore, the deadweight loss = $500 million - ($100 million + $200 million) = $200 million.

Suppose That Australia Imposes a Tariff on Imported Beef