Question

Suppose the nation of Isoland is an importer of textiles and is looking for a way to raise government revenue. The following graph shows the effect of a tariff on textile imports. les Price or С D! E ! F Demand Quantity of Tales Having rejected a tariff on textiles (a tax on imports), the president of Island is now considering the same-sized tax on textile consumption including both imported and domestically reduced textiles). the quantity consumed under a tant and Under a textile consumption tan, the quantity of textiles consumed in Island will be the quanto produced in Island be the quantity produced under a tarif

Answer 1

Given that The consumption tax gaises the price of the congumphion of textiles. The consumphon fase creates a wedge between the price paid by the consumey and the Price received by the selleon, the price received by the selles remains same as the world price. - The price received by the sellers is "PW as the price paid by the buyers is 'Pw+t". as The quantity supplied in Isoland is asi => The producer surpley is 'G”. => the quantity demanded is" apë in Isoland. Before Tax consumphion Tax After change consumer Surplus A+B+C+0+E+ ААВ G None C+0+ E ICIDE Producer Surpley Government Revenue Di adweight loss 1 Total Surplus AAB+C+0+ EtG (CHOTE - A+B+C+D+E+ F + G

the e =) The government revenue is raised more when consumption tax is imposed as "CFDF ESE." => the dead weight loss is small when the consumphon tax is raised as "FZD+F.

Answer 2

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Answer 4