(Figure: The Market for Laptops) Use Figure: The Market for Laptops.Assume that S and D are the domestic supply and demand curves and the world price is P_W.Identify the area of deadweight loss when a tariff raises the domestic price from the world price to P_T.

A) A + B
B) C + D + E + F
C) D + E + F
D) D + F

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Brandon Leung · Accepted Answer

Final Answer : D, Explanation :  Deadweight loss due to a tariff is represented by the areas where the market is no longer efficient, which are typically the areas of consumer and producer surplus that are lost and not gained by anyone else, including the government. In the context of a tariff raising the domestic price above the world price, the deadweight loss is represented by the triangles that show the reduction in quantity consumed and produced compared to the free trade scenario. These areas are typically the ones not gained by domestic producers or the government through the tariff revenue but represent the loss in efficiency in the market. Therefore, areas D and F represent the deadweight loss.

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