Efficiency losses are
A)deadweight losses caused by consumers being prevented by tariffs from buying products at the world price, products that they value more highly than that price.
B)the total loss in consumer surplus from a tariff.
C)the increase in producer surplus that is created by a tariff.
D)the deadweight loss that is created because domestic firms have to charge higher prices to produce units of output than foreign firms would have to charge.

Question

Quizplus · Accepted Answer

Efficiency losses are the deadweight losses that result from a tariff, which occurs when domestic firms have to charge higher prices to produce units of output than foreign firms would have to charge. This loss results from the inefficiency of producing goods and services domestically instead of importing them from other countries at a lower cost. Therefore, option D is the correct answer. Option A describes the concept of consumer surplus, while Option B describes the loss in consumer surplus, and Option C describes the increase in producer surplus.

Efficiency Losses Are