Tariffs result in a decrease in consumer surplus because:
A)the price and the quantity consumed of the protected good increases.
B)the price and the quantity consumed of the protected good decreases.
C)the price of the protected good increases and quantity consumed decreases.
D)the price of the protected good decreases and quantity consumed increases.

Question

Tariffs result in a decrease in consumer surplus because:
A)​the price and the quantity consumed of the protected good increases.
B)​the price and the quantity consumed of the protected good decreases.
C)​the price of the protected good increases and quantity consumed decreases.
D)​the price of the protected good decreases and quantity consumed increases.

Quizplus · Accepted Answer

Tariffs result in an increase in the price of the protected good, which reduces the quantity demanded. As a result, consumers are worse off and consumer surplus decreases. Option A cannot be correct, as an increase in price should lead to a decrease in the quantity consumed, rather than an increase. Option B cannot be correct, as a decrease in price results in either an increase in quantity demanded or no change, but not a decrease. Option D cannot be correct as a decrease in price should lead to an increase in quantity demanded, which is contrary to what happens when tariffs are imposed.

Tariffs Result in a Decrease in Consumer Surplus Because