Suppose that a tariff is imposed on imported cheese.This will have the effect of __________ the price of cheese,__________ consumers' surplus,and __________ producers' surplus.
A) increasing; increasing; increasing
B) decreasing; decreasing; decreasing
C) increasing; increasing; decreasing
D) increasing; decreasing; increasing
E) decreasing; decreasing; increasing

Question

Quizplus · Accepted Answer

When a tariff is imposed on imported cheese, it raises the price of cheese for consumers. This decrease in consumer surplus is because they have to pay a higher price for cheese. However, producers will benefit from the tariff as the price of their cheese increases, resulting in an increase in producer surplus. Therefore, the tariff will lead to an increase in price, a decrease in consumer surplus, and an increase in producer surplus. Choice D is the correct answer.

Suppose That a Tariff Is Imposed on Imported Cheese