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(Figure: The Market for Calculators) Use Figure: The Market for Calculators.Assume that S and D represent the domestic demand and supply of calculators.The world price,PW,equals $100.The government imposes an import tariff of $20 per calculator.Compared with the free trade situation,the tariff leads to a deadweight loss equal to area:
A) K + L.
B) G + J.
C) G + H + I + J.
D) There is no deadweight loss,since the tariff revenue the government receives offsets any losses.
Import Tariff
A tax imposed by a government on goods and services imported from other countries, used to control trade.
Deadweight Loss
A loss of economic efficiency that can occur when equilibrium in a market is not achieved or is not achievable.
Free Trade
An economic policy that allows imports and exports among member countries with little to no tariff barriers, quotas, or subsidies.
- Comprehend the repercussions of trade tactics like tariffs and quotas on home markets and the global financial environment.
- Ascertain the consequences of international commerce on the surplus outcomes for consumers and producers.
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Learning Objectives
- Comprehend the repercussions of trade tactics like tariffs and quotas on home markets and the global financial environment.
- Ascertain the consequences of international commerce on the surplus outcomes for consumers and producers.
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