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).

a. Using Figure, identify the quantity consumed and the quantity produced in Isoland under a textile consumption tax.

b. Construct a table similar to that in Figure for the textile consumption tax.

c. Which raises more revenue for the government—the consumption tax or the tariff? Which has a smaller deadweight loss?Explain.

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Price of Textiles Domestic supply Equilibrium without trade Price with tariff C Tariff Price World without tariff G Imports with tariff Domestic price demand Quantity of Textiles Imports without tariff Price of Textiles Domestic supply Equilibrium without trade Price with tariff C Tariff Price World without tariff G Imports with tariff Domestic price demand Quantity of Textiles Imports without tariff