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

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Definitions:

Customer Demand

The desire and willingness of consumers to purchase goods or services at a given price.

Coordination

The organization of the different elements of a complex body or activity so as to enable them to work together effectively.

Functional Form

The specific mathematical relationship or equation used to describe how variables in a model are connected.

Corporate Organization

A structure of a corporation, detailing its hierarchy, management roles, and division of responsibilities.