Question

From the Work It Out "Effects of Trade Barriers," you can see that a tariff raises the price of imports. What is interesting is that the price rises by less than the amount of the tariff. Who pays the rest of the tariff amount? Can you show this graphically?

Short answer

The rest of the tariff amount is paid by the producer or importer.

The graph is as follows,

Step-by-step solution

Step 1. Meaning of tariff

An act of imposing a tax implying to discourage imports from international markets is called a tariff.

Step 2. Who pays the rest of the tariff amount?

The rest of the tariff amount is paid by the producer or importer this is because a tariff is a type of tax. The tax burden is to be shared between the consumers and producers.

Step 3. The graph.

The graphical representation is as follows,

Here $P1$is the price of the imported good and $P2$is the price received by the producer. The remaining is the government's revenue from imposing the taxes.