The above figure shows the domestic supply of and domestic demand for an imported good. The world price is $15 per unit
a. At the world price of $15 per unit, what is the domestic consumption and domestic production?
b. At the world price of $15 per unit, what is the quantity imported?
c. If the government imposes a tariff of $5 per unit, what is the domestic consumption and domestic production?
d. With the $5 per unit tariff, what is the quantity imported?
e. How much revenue does the government collect with a tariff of $5 per unit?
a. Domestic consumption is 8 million units per year and domestic production is 0.
b. The quantity imported is 8 million units per year.
c. Domestic consumption is 6 million units per year and domestic production is 2 million units per year.
d. The quantity imported is 4 million units per year.
e. The government collects $5 per unit imported and 4 million units are imported, so the government's revenue from the tariff is $5 × 4 million = $20 million per year.
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