Question

The following graph shows the domestic market for oil in the United States, where Sp is the domestic supply curve, and Dp is the domestic demand curve. Assume the United States is considered a large nation, meaning that changes in the quantity of its imports due to a tariff influence the world price of oil. Under free trade, the United States faced a total supply schedule of SD+w, which shows the quantity of oil that both domestic and foreign producers together offer domestic consumers. In this case, the free-trade equilibrium (black plus) occurs at a price of $350 per barrel of oil and a quantity of 16 million barrels. At this price, the United States imports 12 million barrels of oil. Suppose the U.S. government imposes a $125-per-barrel tariff on oil imports. On the following graph, use the tan line (rectangle symbol) to draw the new total supply schedule including the tariff (SD+W+T). Then use the grey point (star symbol) to indicate the new market equilibrium price and quantity as a result of the tariff. 700 so 650 600 SO+W+T 550 rrel)

Answer 1

True

When the tariff is imposed on all imports, the government receives tariff revenue.This will helps to increase the national welfare of a country.