Question

The U.S. wheat market is shown in Figure 17P-5. Suppose the United States wants to protect its wheat industry by imposing a tariff of $1/\$ 1 / bushel on foreign wheat, which currently sells at the world price of $4/\$ 4 / bushel.

b. How much revenue does the U.S. government collect from the tariff?

Solution

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Answered 1 year ago
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The government revenue can be calculated using Equation 11.

Equation 11:

Government revenue=(QDQS)(Tariff–World Price)\text{Government revenue} = (Q_D – Q_S) \cdot (\text{Tariff} – \text{World Price})

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