Consider a market in which there is an import tariff. Which of the following is true?
A) The lost consumer surplus equals the gain in producer surplus plus the government revenue.
B) The lost consumer surplus equals the gain in producer surplus.
C) The lost consumer surplus plus the deadweight loss equals the gain in producer surplus plus the government revenue.
D) The lost consumer surplus equals the gain in producer surplus plus the government revenue plus the deadweight loss.

Question

Quizplus · Accepted Answer

The lost consumer surplus is distributed among the gain in producer surplus, government revenue, and the deadweight loss, which represents the inefficiency introduced by the tariff.

Consider a Market in Which There Is an Import Tariff