Figure 9.5

(a) is the same as Figure 9.1

(b) and shows the situation with free international trade. The United States produces 20 million T-shirts and imports 40 million T-shirts a year at the world price of $5 a T-shirt.

Figure 9.5

(b) shows what happens with a tariff, which is set at $2 per Tshirt.

The following changes occur in the U.S. market for T-shirts:

The price of a T-shirt in the United States rises by $2.

The quantity of T-shirts bought in the United States decreases.

The quantity of T-shirts produced in the United States increases.

The quantity of T-shirts imported into the United States decreases.

The U.S. government collects a tariff revenue.