Based on the above graph, answer the following questions; 1) How much is the tar

Question

Based on the above graph, answer the following questions;

1) How much is the tariff?

2) How much are government revenues after the tariff?

3) What’s the quantity of imports before the tariff?

4) What’s the quantity of imports after the tariff?

5) What letter or letter represents the gain in producer surplus after the tariff?

6) What letter or letters represent the loss in consumer surplus after the tariff?

7) After the tariff what letter or letters represents the loss to the economy as a whole?

Part 2 Questions

1: How does a free trade area differ from a customs union?

2: How does a common market differ from an economic union?

Explanation / Answer

1) tariff = 110-90= 20

2) government revenue= 10*(285-225)= 600

3) the quantity of imports before the tariff = 310-200= 110

4) the quantity of imports after the tariff = 285-225 = 60

5) the letter represents the gain in producer surplus after the tariff is A

6) the letters represent the loss in consumer surplus after the tariff is A+B+C+D

7) After the tariff, the letters represents the loss to the economy as a whole is B+D

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