Suppose that Canada produces 1.0 million bicycles a year and imports another 4.0 million; there is no tariff or other import barriers. Bicycles sell…
Suppose that Canada produces 1.0 million bicycles a year and imports another 4.0 million; there is no tariff or other import barriers. Bicycles sell for $400 each. Parliament is considering a $40 tariff on bicycles. What is the maximum net national loss that this could cause Canada? What is the minimum national loss if Canada is a small country that can not affect the world price? (Hint: draw a diagram with supply and demand and put numbers given here on it. Next, imagine the possible positions and slopes of the relevant curves.)
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