When a nation imports a good, its ________ surplus decreases and its ________ surplus increases.
A) consumer; producer
B) total; consumer
C) producer; consumer
D) consumer; consumer
E) producer; producer

Question

Quizplus · Accepted Answer

When a nation imports a good, it means that domestic consumers are buying goods from foreign producers instead of domestic producers. This means that the domestic producer surplus decreases (as they are selling less) and consumer surplus increases (as they are able to buy the good at a lower price). Overall, there is a net gain in total surplus, but the gains are mostly experienced by the consumers rather than the producers. Therefore, the answer is (C) producer surplus decreases and consumer surplus increases.

When a Nation Imports a Good, Its ________ Surplus Decreases