Question 5 (1 point)

The market for USB flash drives in Country C is perfectly competitive and is in equilibrium.

Domestic demand is given by Q^d = 300 - 4P and domestic supply is given by Q^s = 2P.

The world price for flash drives is $20.

The government of country C imposes a tariff of $20 on all imported flash drives.

Considering (a) the change in producers' surplus and (b) the government revenue from the tariff, can we consider that the tariff provides an overall increase (gain) or an overall decrease (loss) of surplus?

What is value of this gain or loss (in dollars)?

Question 5 options:

1)

Total surplus increases by $1,200

2)

Total surplus increases by $2,400

3)

Total surplus decreases by $1,200

4)

Total surplus decreases by $800

5)

Total surplus decrease by $2,400