Figure 9-22
The following diagram shows the domestic demand and domestic supply in a market.In addition,assume that the world price in this market is $40 per unit.
-Refer to Figure 9-22.Suppose the government imposes a tariff of $20 per unit.The amount of revenue collected by the government from the tariff is
A)$6,000.
B)$9,000.
C)$12,000.
D)$15,000.

Question

Figure 9-22
The following diagram shows the domestic demand and domestic supply in a market.In addition,assume that the world price in this market is $40 per unit. 
-Refer to Figure 9-22.Suppose the government imposes a tariff of $20 per unit.The amount of revenue collected by the government from the tariff is
A)$6,000. 
B)$9,000. 
C)$12,000. 
D)$15,000.

Quizplus · Accepted Answer

When a tariff of $20 per unit is imposed, the domestic price increases to $60 ($40 + $20) per unit, while the world price remains at $40 per unit. This causes a decrease in domestic demand from 60 units to 40 units, and an increase in domestic supply from 20 units to 40 units. The shaded area in Figure 9-22 represents the amount of tariff revenue collected by the government, which is calculated by multiplying the tariff rate ($20) by the quantity of imports (20 units), which equals $400 per unit. Therefore, the total tariff revenue collected by the government is $400 per unit x 30 units, which equals $12,000.

Figure 9-22 The Following Diagram Shows the Domestic Demand and Domestic Supply