Relative to free trade, when a tariff is imposed in a market for an imported good,
A) the producer surplus in that market decreases.
B) the total surplus in that market decreases.
C) tariff revenue decreases.
D) the consumer surplus in that market increases.
E) deadweight loss decreases.

Question

Quizplus · Accepted Answer

When a tariff is imposed, it raises the price of the imported good, decreasing the quantity demanded and reducing consumer surplus. The producer surplus may increase due to the higher price, but the total surplus in the market decreases due to the decrease in consumer surplus. Tariff revenue may increase, but it is not guaranteed to do so. Deadweight loss may increase as a result of the inefficiency created by the tariff. Therefore, the best answer is B, as it is the only option that accurately reflects the overall effect of a tariff on the market.

Relative to Free Trade, When a Tariff Is Imposed in a Market