Figure 9-5
-Spain is an importer of computer chips, taking the world price of $10 per chip as given. Suppose Spain imposes a $5 tariff on chips. Which of the following outcomes is possible?
A)Spanish consumers of chips lose and Spanish producers of chips gain.
B)Fewer Spanish-produced chips are sold in Spain.
C)Spanish consumers and producers of chips gain.
D)Total surplus in the Spanish chip market increases.

Question

Figure 9-5 
-Spain is an importer of computer chips, taking the world price of $10 per chip as given. Suppose Spain imposes a $5 tariff on chips. Which of the following outcomes is possible?
A)Spanish consumers of chips lose and Spanish producers of chips gain. 
B)Fewer Spanish-produced chips are sold in Spain. 
C)Spanish consumers and producers of chips gain. 
D)Total surplus in the Spanish chip market increases.

Quizplus · Accepted Answer

Imposing a tariff on imported chips increases the price of chips in Spain, making imported chips more expensive. This hurts Spanish consumers, who now have to pay more for chips, but can benefit Spanish producers by making their chips relatively cheaper compared to the more expensive imported chips, potentially increasing their sales.

Figure 9-5 -Spain Is an Importer of Computer Chips, Taking the World