Consider a good that is both imported and produced domestically.The imposition of a tariff on this good causes a(n)________ in consumer surplus and a(n)________ in producer surplus.

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When a tariff is imposed on an imported good, its price increases. As a result, consumers have to pay more to buy the good, which reduces their consumer surplus. On the other hand, domestic producers benefit from the higher price, which increases their producer surplus. Therefore, the imposition of a tariff on a good that is both imported and produced domestically causes a decrease in consumer surplus and an increase in producer surplus.

Consider a Good That Is Both Imported and Produced Domestically