If the import supply curve is horizontal at the world price:
A) a tariff will lower domestic aggregate surplus.
B) a tariff will increase domestic aggregate surplus.
C) a tariff will not change domestic aggregate surplus.
D) a quota will increase domestic aggregate surplus.

Question

Quizplus · Accepted Answer

A tariff on imports, when the import supply curve is horizontal at the world price, will lower domestic aggregate surplus because it increases the price of imported goods, leading to a decrease in consumer surplus and an inefficient allocation of resources.

If the Import Supply Curve Is Horizontal at the World