A tariff is imposed on a good.This ________ producer surplus,________ consumer surplus,and ________ total surplus in the home country.
A)increases;decreases;increases
B)increases;does not change;increases
C)increases;increases;increases
D)decreases;decreases;decreases
E)increases;decreases;decreases

Question

Quizplus · Accepted Answer

A tariff increases the domestic price of a good, which reduces domestic consumption and increases domestic production. This results in an increase in producer surplus but a decrease in consumer surplus. Overall, total surplus decreases as the losses in consumer surplus outweigh the gains in producer surplus.

A Tariff Is Imposed on a Good