The Diagram Below Shows Supply and Demand Curves for Bicycles

question 3

Multiple Choice

The diagram below shows supply and demand curves for bicycles in the domestic Canadian market. Assume that all bicycles are identical.
FIGURE 34- 4
-Refer to Figure 34- 4. Suppose the world price of bicycles is $200 and Canada has in place a 50- percent tariff on this good. The deadweight loss to the Canadian economy resulting from this tariff is per year.

• A)$0.5 million
• B)$1.5 million
• C)$0
• D)$2.0 million
• E)$1.0 million

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Definitions:

Tax

Compulsory financial charges imposed by a government on individuals and organizations to fund public expenditures.

Good

An item or product that satisfies a want or need, available for sale or trade.

Market Demand

The total quantity of a good or service that all consumers in the market are willing and able to purchase at different prices.

Market Supply

The total quantity of a good or service that all producers in a market are willing and able to sell at various price levels.