The loss of surplus associated with the expansion of domestic production resulting from the tariff is attributed to the:
A)production effect of a tariff
B)terms of trade effect of a tariff
C)revenue effect of a tariff
D)consumption effect of a tariff

Question

Quizplus · Accepted Answer

The production effect of a tariff refers to the loss of economic efficiency when higher-cost domestic production is substituted for lower-cost imports due to the tariff. This leads to a loss of surplus because resources are not being used in the most efficient manner.

The Loss of Surplus Associated with the Expansion of Domestic