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Question: A small country is considering imposing a tariff on imported wine at the rate of $5 per bottle.
Please help; the person who answered my question was very confusing.
Question: A small country is considering imposing a tariff on imported wine at the rate of $5 per bottle. Economists have estimated the following based on this tariff amount:
World price of wine (free trade) $20 per bottle
Domestic production (free trade) 500,000 bottles
Domestic production (after tariff) 600,000 bottles
Domestic consumption ( free trade) 750,000 bottles
Domestic consumption ( after tariff) 650,000 bottles
The question I need help answering is as follows:
The impostion of the tariff on wine will cause the surplus of the domestic producers to __ by ___
a.) rise; $1 million
b.) rise; $500,000
c.) fall; $2.5 million
d.) rise; $2.75 million