Figure 9-24
The following diagram shows the domestic demand and supply in a market.Assume that the world price in this market is $20 per unit.
-Refer to Figure 9-24.Suppose the government imposes a tariff of $10 per unit.The deadweight loss caused by the tariff is
A)$25.
B)$50.
C)$75.
D)$100.

Question

Figure 9-24
The following diagram shows the domestic demand and supply in a market.Assume that the world price in this market is $20 per unit. 
-Refer to Figure 9-24.Suppose the government imposes a tariff of $10 per unit.The deadweight loss caused by the tariff is
A)$25. 
B)$50. 
C)$75. 
D)$100.

Quizplus · Accepted Answer

With a tariff of $10 per unit, the domestic price increases to $30 per unit (the world price plus tariff). At this price, domestic production increases to PQ and domestic consumption decreases to PR. The area of the deadweight loss triangle is (1/2) x (PS-PQ) x (PR-PM) = (1/2) x (20-10) x (40-30) = $50. Therefore, the best choice is B, as it represents the correct deadweight loss caused by the tariff.

Figure 9-24 the Following Diagram Shows the Domestic Demand and Supply in Supply