When a tariff is imposed on imported goods and services, the _____ in consumer surplus is _____ the ______ in producer surplus.
A) increase; less than, increase
B) increase; less than, decrease
C) decrease; greater than, increase
D) decrease; less than, increase
E) increase; the same as; decrease

Question

Quizplus · Accepted Answer

When a tariff is imposed, the price of imported goods and services increases. This leads to a decrease in consumer surplus because consumers have to pay more for these goods and services or reduce their consumption. On the other hand, domestic producers benefit from reduced competition, leading to an increase in producer surplus. The decrease in consumer surplus is typically greater than the increase in producer surplus because the tariff-induced price increase affects all consumers, while only certain producers benefit.

When a Tariff Is Imposed on Imported Goods and Services