If the free trade price is IP and this country imposes a trade tariff of $6, the loss to the economy as a result of this tariff is represented by     (a) area (a) in this graph     (b) area (b) in this graph     (c) areas (c) + (d)     (d) areas (b) + (c) + (d) + (e)     (e) areas (a) + (b) + (c) + (d)

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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 If the free trade price is IP and this country imposes a trade tariff of $6, the loss to the economy as a result of this tariff is represented by

   

(a) area (a) in this graph

   

(b) area (b) in this graph

   

(c) areas (c) + (d)

   

(d) areas (b) + (c) + (d) + (e)

   

(e) areas (a) + (b) + (c) + (d)

25
20
15
10
5
0
P
a
0 3
U
6
e
b
O
S
9 12 15 18 21
-P*
-IP
-D
24
Q
Transcribed Image Text:25 20 15 10 5 0 P a 0 3 U 6 e b O S 9 12 15 18 21 -P* -IP -D 24 Q
Expert Solution
Step 1: Describe the problem

The imposition of a tariff on imports will increase the price faced in domestic countries.

It can be seen that the free trade price line shifts upward from 'IP' to 'P*' after the imposition of tariffs.


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