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Who bears the burden of the tariff

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Reference no: EM131439756

Suppose that in Japan, without a tariff 10,000 cars will be sold per year at an equilibrium price of $20,000. With a $5,000 tariff, supply decreases such that 8,000 cars are produced at $22,500 per car. 

  • Use a supply and demand diagram to graphically illustrate the example above.
  • Why is the increase in price less than the tariff?
  • Who bears the burden of the tariff?
  • What are government revenues from the tariff?
  • What is the "dead-weight loss" associated with the tariff - i.e., the lost in Producer Surplus and Consumer Surplus?

Reference no: EM131439756

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