If the import supply curve is upward-sloping:
A) a tariff or quota can increase domestic aggregate surplus.
B) a quota can increase domestic aggregate surplus, but a tariff cannot.
C) a tariff can increase domestic aggregate surplus, but a quota cannot.
D) neither a tariff nor a quota can increase domestic aggregate surplus.

Question

Quizplus · Accepted Answer

An upward-sloping import supply curve means that as the quantity of imports increases, the price of those imports also increases. This implies that as the quantity of imports decreases due to a tariff or quota, the price of those remaining imports may increase, thereby incentivizing domestic producers to increase production, which can increase domestic aggregate surplus. Therefore, a tariff or quota can increase domestic aggregate surplus if the import supply curve is upward-sloping.

If the Import Supply Curve Is Upward-Sloping