The graph shows the relationship between supply and domestic demand for small, f
ID: 1143387 • Letter: T
Question
The graph shows the relationship between supply and domestic demand for small, fuel-efficient SUVs under several conditions: with no imports, the supply is entirely domestic (Sdom); with free trade, domestic suppliers must compete with foreign ones (Sfree); and with a tariff of $4000 per imported SUV there is foreign competition but less competition than there is with free trade (Starf). Use the area tool to outline the region of the graph that represents government revenue from tariffs. Your answer should be a rectangle with four corners.Explanation / Answer
The tariff revenue is correctly shaded in.
With the tariff, Quantity demanded = 16,000 and Quantity supplied = 10,000.
Quota = Quantity demanded - Quantity supplied = 16,000 - 10,000 = 6,000
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