As a large country imposes a small tariff in the graph above, the world welfare

Question

As a large country imposes a small tariff in the graph above, the world welfare

Select one:

a. goes up by (b+d)

b. goes down by (b+d)

c. goes up by (e - b + d)

d. goes down by (e - b + d)

A Large Country Imposes a Small Tariff A. The National Market for Bicydes B. The Market for Bicycle Imports Price (S per bike) Price $ per bike) - 375 Foreign export supply S to the United States 303 300 297 303 300 297 Tariff U.S. demand for imports 225 0.6 0.62 1.58 1.6 Quantity (millions of bikes) 0 Quantity (millions of bikes) 0.96 1.0 M1 0.96 AM 0.04 ?,-1.0

Explanation / Answer

By imposing tariff creates a DWL ( b+d). tariff revenue is (c+e).

So world welfare decrease by (b+d), Option b is correct.

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