Trade Restrictions – Tariffs

Directions: Answer the questions below based on the graph.

1.How many units will the domestic firms produce without trade?

2.How many units will the domestic firms produce without a tariff if the foreign producer can sell the product at a $4 price?

3.How many units will the foreign firms produce / sell if a government tariff of $2.00 is imposed on foreign goods?

4.What will be the total government revenues if a tariff of $2.00 is imposed on foreign goods?

5.What will be the total deadweight losses if a tariff of $2.00 is imposed on foreign goods?

microeconomics 70