Having rejected a tariff on textiles (a tax on imports), the president of Isoland is now considering the same-sized tax on textile consumption (includingboth imported and domestically produced textiles).Compared to the free trade scenario, the quantity of textiles consumed in Isoland willunder a textile consumption tax.willThe following table shows the effect of an import tariff on the nation of Isoland.Complete the remaining columns of the following table by indicating the effect of the same-sized tax on textile consumption.ConsumerSurplusProducer SurplusGovernmentRevenueTotal SurplusBefore Tariff or TaxA+B+C+D+E+FGNoneA+B+C+D+E+F+GCompared to the tariff, the consumption tax raisesAfterA + Bdeadweight loss associated with it.C+GEUnder TariffA+B+C+E+GChange- (C+D+E+F)+C+Eand the quantity produced in Isoland- (D+F)Under Consumption TaxAfterChangerevenue for the government, and has 2. Ch9: Problems and Applications Q8Suppose 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 ofa tariff on textile imports.Price of TextilesAсGQ5,1DBELLFQD.2Q5.2Quantity of TextilesSupplyDemandD,1Pw+TPW?

As we know, with a consumption tax equivalent to a tariff the demand curve will shift downwards by…

Having rejected a tariff on textiles (a tax on imports), the president of Isoland is now considering the same-sized tax on textile consumption (including both imported and domestically produced textiles). Compared to the free trade scenario, the quantity of textiles consumed in Isoland will will under a textile consumption tax. The following table shows the effect of an import tariff on the nation of Isoland. Consumer Surplus Producer Surplus Government Revenue Total Surplus Complete the remaining columns of the following table by indicating the effect of the same-sized tax on textile consumption. Under Tariff Before Tariff or Tax A+B+C+D+E+F G None Compared to the tariff, the consumption tax raises After A + B A+B+C+D+E+F+G A+B+C+E+G deadweight loss associated with it. C +G E Change - (C+D+E+F) +C +E I - (D+F) and the quantity produced in Isoland Under Consumption Tax After Change revenue for the government, and has

Having rejected a tariff on textiles (a tax on imports), the president of Isoland is now considering the same-sized tax on textile consumption (including both imported and domestically produced textiles). Compared to the free trade scenario, the quantity of textiles consumed in Isoland will will under a textile consumption tax. The following table shows the effect of an import tariff on the nation of Isoland. Consumer Surplus Producer Surplus Government Revenue Total Surplus Complete the remaining columns of the following table by indicating the effect of the same-sized tax on textile consumption. Under Tariff Before Tariff or Tax A+B+C+D+E+F G None Compared to the tariff, the consumption tax raises After A + B A+B+C+D+E+F+G A+B+C+E+G deadweight loss associated with it. C +G E Change - (C+D+E+F) +C +E I - (D+F) and the quantity produced in Isoland Under Consumption Tax After Change revenue for the government, and has

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter17: International Trade

Section: Chapter Questions

Problem 2.5P

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