The introduction of a tariff ________ consumer surplus and ________ total surplus.
A)increases;decreases
B)increases;increases
C)decreases;does not change
D)decreases;decreases
E)decreases;increases

Question

Quizplus · Accepted Answer

The introduction of a tariff, which is a tax on imports, increases the price of the imported goods for consumers. This results in a decrease in consumer surplus (the difference between the maximum price a consumer is willing to pay and the actual price paid). At the same time, the tariff encourages domestic producers to increase production, which increases producer surplus (the difference between the actual price received by a producer and the minimum price they are willing to accept). However, this increase in producer surplus does not offset the decrease in consumer surplus, resulting in a decrease in total surplus (the sum of consumer and producer surplus).

The Introduction of a Tariff ________ Consumer Surplus and ________

The Introduction of a Tariff Consumer Surplus and