A Small Country Is Considering Imposing a Tariff on Imported

question 6

Multiple Choice

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: $$\begin{array} { l l } \text { World price of wine (free trade) : } & \$ 20 \text { per bottle } \\\text { Domestic production (free trade) : } & 500,000 \text { bottles } \\\text { Domestic production (after tariff) : } & 600,000 \text { bottles } \\\text { Domestic consumption (free trade) : } & 750,000 \text { bottles } \\\text { Domestic consumption (after tariff) : } & 650,000 \text { bottles }\end{array}$$ The consumption effect of the tariff on wine is worth

• A)$250,000.
• B)$500,000.
• C)$3.5 million.
• D)$2.75 million.

---

Definitions:

Gross Profit Ratio

A financial metric that measures a company's gross profit as a percentage of its revenues, indicating efficiency in using labor and supplies.

Net Realizable Value

The estimated selling price of an item in the ordinary course of business minus any cost associated with the sale or disposal of the item.

Selling Price

The amount of money for which a product or service is sold to the customer.

Lower Of Cost

A principle in accounting that requires inventory to be recorded at either its cost or its market value, whichever is lower.