When a tariff is imposed on imported goods or services, the consumer surplus in the domestic market _____ and producer surplus in the domestic market _____ .
A) rises; falls
B) rises; rises
C) falls; falls
D) falls; rises
E) falls; stays the same

Question

Quizplus · Accepted Answer

When a tariff is imposed, the price of imported goods or services increases. This leads to a decrease in consumer surplus because consumers have to pay more for the goods or services. On the other hand, domestic producers benefit from reduced competition from imports, which can lead to an increase in producer surplus as they can sell more goods or services at higher prices.

When a Tariff Is Imposed on Imported Goods or Services