Suppose That a Tariff Increases Domestic Production of a Good

question 180

Multiple Choice

Suppose that a tariff increases domestic production of a good from 25 million units to 75 million units and raises the domestic price by $1.50. Assuming a linear domestic supply curve and a perfectly elastic world supply curve, what is the value of the resources wasted by increased domestic production?

• A) $37.5 million
• B) $50 million
• C) $75 million
• D) $150 million

---

Definitions:

Income-Producing

Refers to assets or activities that generate earnings, profit, or revenue.

Real Property

Land and anything permanently attached to it, including buildings and structures, classified legally as immovable.

Principle

A fundamental truth or proposition that serves as the foundation for a system of belief or behavior.

Interest

The charge for the privilege of borrowing money, typically expressed as an annual percentage of the principal.