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   Draw a demand and supply curve for the country’s wine market to show the effects of the tariff. Find the change in consumer surplus, producer surplus, and government revenue resulting from the tariff.

Principles of Macroeconomics (MindTap Course List)
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Chapter9: Application: International Trade
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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

 

  1. Draw a demand and supply curve for the country’s wine market to show the effects of the tariff.
  2. Find the change in consumer surplus, producer surplus, and government revenue resulting from the tariff.
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