In the country levying the tariff, the tariff will
A) increase both consumer and producer surplus.
B) decrease both the consumer and producer surplus.
C) decrease consumer surplus and increase producer surplus.
D) increase consumer surplus and decrease producer surplus.
E) decrease consumer surplus but leave producers surplus unchanged.

Question

Quizplus · Accepted Answer

The tariff will increase the price of the imported product in the domestic market, reducing the quantity demanded by domestic consumers. This decrease in consumption will result in a decrease in consumer surplus. At the same time, domestic producers can increase their sales because of the higher price, resulting in an increase in producer surplus. Therefore, the tariff will decrease consumer surplus and increase producer surplus in the country levying the tariff.

In the Country Levying the Tariff, the Tariff Will