The U.S. government currently imposes a $0.54 per gallon tariff on all ethanol imported into the country. If this tariff were removed, then:

Question

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Removing the tariff would lower the price of imported ethanol, making it cheaper compared to domestically produced ethanol. This would lead to a decrease in the domestic price of ethanol (A), a reduction in the quantity of ethanol supplied by domestic producers due to increased competition (B), an increase in consumer surplus as consumers can now buy ethanol at a lower price (C), and a decrease in producer surplus since domestic producers would receive lower prices and sell less (D).

The US Government Currently Imposes a $0