Consider the market for t-shirts in Australia, a small country. The domestic quantity demanded qd is given by qd = 10 – 2P, where P is the market price. The domestic quantity supplied qs is given by qs = P. The world price for t-shirts is $1. If the Australian government introduces a $2 tariff, what are the deadweight losses from overproduction and from under-consumption and the what is the tariff revenue raised?
a. The DWL is $2; and tariff revenue is $1. b. The DWL is $4; and tariff revenue is $2. c. The DWL is $6 ; and tariff revenue is $4. d. **The DWL is $6; and tariff revenue is $2. e. None of the above