Figure W: The market for docks in Italy with S is the supply curve of Italian pr

Question

Figure W: The market for docks in Italy with S is the supply curve of Italian producers and D Is Italian consumers demand curve. The horizontal axis labeled "Q" measures the quantity of clocks. The vertical axis labeled "P" measures the price per clock. PHome $25, is the price of a clock in italy when Italy does not partiopate in intemational trade. world $10, is the price of a clock in italy when Italy participates in intemational trade. Pworldtanff $10+ S5 $15, ia the price of a clock in taly when Italy partiipates in trade and the Itaian government imposes a tariff of $5 per dock a4 $25 $15 $10 home Pworld+ tariff P world a3 a2 1b2 b3b4 a1

Explanation / Answer

Imposition of tariff will increase supply from 10,000 to 12,000 and decrrase demand from 60,000 to 42,000. Hence the deadweight loss is the area b1+ b4. (D).

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