An import tariff:
A)increases prices for domestic consumers.
B)decreases prices for domestic consumers.
C)reduces producers' surplus.
D)increases consumer's surplus.

Question

Quizplus · Accepted Answer

An import tariff is a tax imposed by a government on imported goods. This tax increases the price of the imported goods, which leads to an increase in prices for domestic consumers. Therefore, choice A is the correct answer. Import tariffs reduce the amount of imports into a country, which reduces the competition for domestic producers. As a result, domestic producers are able to charge higher prices for their goods leading to an increase in producer surplus. However, the higher prices for domestic consumers and reduced competition can decrease consumer surplus. So, options C and D are not correct.

An Import Tariff