The diagram below shows the Canadian market for leather shoes, which we assume to be competitive. The world price is pw. If the Canadian government imposes a tariff of t dollars per unit, the domestic price then rises to pw + t

a. What quantity of leather shoes is imported before the tariff is imposed? After the tariff?
b. What is the effect of the tariff on the Canadian production of shoes? Which areas in the diagram show the increase in domestic producer surplus?
c. Which areas in the diagram show the reduction in domestic consumer surplus as a result of the higher Canadian price?
d. The Canadian government earns tariff revenue on the imported shoes. Which area in the diagram shows this tariff revenue?
e. What is the overall effect of this tariff on the economy? Which area in the diagram shows the deadweight loss?

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02 Quantity