Suppose that Canada produces 1.0 million bicycles a year and imports another 0.4 million; there is no tariff or other import barrier. Bicycles sell for $400 each. Parliament is considering a $40 tariff on bicycles like the one portrayed in given figure.
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 cannot affect the world price?
