Figure 4.1 illustrates the demand and supply schedules for pocket calculators in Mexico, a "small" nation that is unable to affect the world price.
Figure 4.1. Import Tariff Levied by a "Small" Country
-Consider Figure 4.1.With a per-unit tariff of $3, the quantity of imports decreases to
A) 20 calculators.
B) 40 calculators.
C) 50 calculators.
D) 70 calculators.

Question

Figure 4.1 illustrates the demand and supply schedules for pocket calculators in Mexico, a "small" nation that is unable to affect the world price.
Figure 4.1. Import Tariff Levied by a "Small" Country 
-Consider Figure 4.1.With a per-unit tariff of $3, the quantity of imports decreases to
A) 20 calculators. 
B) 40 calculators. 
C) 50 calculators. 
D) 70 calculators.

Quizplus · Accepted Answer

According to Figure 4.1, at a per-unit tariff of $3, the quantity of imports decreases to 40 calculators. This is shown by the point where the world price (PW) intersects with the Total revenue (TR) line with the tariff added ($37 = $34 + ($3 × 10)). At this point, the domestic price (PD) is $37, which is higher than the world price of $34, and as a result, there is a decrease in quantity demanded from the initial quantity of 50 calculators to 40 calculators.

Figure 41 Illustrates the Demand and Supply Schedules for Pocket Calculators