Question 8 Suppose the U.S. government imposes a $0.40 per pound tariff on rice

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Question 8

Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 7-2 shows the impact of this tariff.


Refer to Figure 7-2. The tariff revenue collected by the government equals the area

D + E + F.

B + D + E + F.

E.

C + D + E + F.

Question 9

Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 7-2 shows the impact of this tariff.


Refer to Figure 7-2. Without the tariff in place, the United States consumes

31 million pounds of rice.

42 million pounds of rice.

9 million pounds of rice.

15 million pounds of rice.

Question 10

Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 7-2 shows the impact of this tariff.


Refer to Figure 7-2. Without the tariff in place, the United States produces

15 million pounds of rice.

31 million pounds of rice.

9 million pounds of rice.

42 million pounds of rice.

Question 11

Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 7-2 shows the impact of this tariff.


Refer to Figure 7-2. With the tariff in place, the United States

imports 16 million pounds of rice.

exports 31 million pounds of rice.

imports 15 million pounds of rice.

imports 9 million pounds of rice.

Question 12

Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 7-2 shows the impact of this tariff.


Refer to Figure 7-2. As a result of the tariff, domestic producers increase their quantity supplied by

31 million pounds of rice.

22 million pounds of rice.

15 million pounds or rice.

6 million pounds of rice.

Question 13

Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 7-2 shows the impact of this tariff.


Refer to Figure 7-2. The increase in domestic producer surplus as a result of the tariff is equal to the area

C.

C + G.

A + C + G.

C + D + G + H + I.

Question 14

Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 7-2 shows the impact of this tariff.


Refer to Figure 7-2. The tariff causes domestic consumption of rice

to rise by 16 million pounds.

to fall by 11 million pounds.

to fall by 27 million pounds.

to rise by 6 million pounds.

Question 15

Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 7-2 shows the impact of this tariff.


Refer to Figure 7-2. The loss in domestic consumer surplus as a result of the tariff is equal to the area

D + E + F.

B + D + E + F.

B.

C + D + E + F.

D + E + F.

B + D + E + F.

E.

C + D + E + F.

Explanation / Answer

8. The tariff revenue collected by the government equals the area E.

9. Without the tariff in place, the United States consumes 42 millions pound of rice. Because the price line cuts the demand curve at a point where consumer consumes 42 millions pound of rice.

10. Without the tariff in place, the United States produces 9 millions pound of rice. This is because at that low price producers are unwilling to produce more and the price line cuts the supply curve at a point where producers produce 9 millions pound of rice.

11. With the tariff in place, the United States imports 16 million pounds of rice. This is because at tariff imposed price quantity demanded by the consumers are 31 millions pound of rice and producers supplied 15 millions pound of rice. So, to meet the consumer demand the country needs to import (31 - 15) = 16 millions pound of rice.

12. As a result of the tariff, domestic producers increase their quantity supplied by 6 millions pound of rice. This is because at price including tariff producers produce 15 millions pound of rice and earlier at world price they produces 9 millions pound of rice. So, there is an increase of (15 - 9) = 6 millions pound of rice.

13. . The increase in domestic producer surplus as a result of the tariff is equal to the area C. This is because initially when there is no tariff, producer surplus is the area G, but due to imposition of tariff producer surplus is now the area G + C. So, producer surplus increases by the area C.

14. The tariff causes domestic consumption of rice to fall by 11 million pounds. This is because, initially without tariff consumers demanded 42 million pound of rice. And after imposition of tariff, consumers demanded now 31 millions pound of rice. So, consumption falls by (42 - 31) = 11 millions pound of rice.

15. The loss in domestic consumer surplus as a result of the tariff is equal to the area C + D + E + F. This is because, initially, consumer surplus is the area A + B + C + D + E + F. But after imposition of tariff, consumer surplus is now the area A + B. So, the loss in domestic consumer surplus is the area C +D + E + F.

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