The resulting increase in producer surplus made possible by the imposition of a tariff is often referred to as the:
A)tax effect of a tariff
B)revenue effect of a tariff
C)subsidy effect of a tariff
D)consumption effect of a tariff

Question

Quizplus · Accepted Answer

The imposition of a tariff can lead to an increase in producer surplus because it effectively acts as a subsidy for domestic producers. By increasing the cost of imported goods, tariffs make domestically produced goods more competitive in the market, potentially increasing sales and profits for domestic producers. This is why the increase in producer surplus due to a tariff is often referred to as the subsidy effect of a tariff.

The Resulting Increase in Producer Surplus Made Possible by the Imposition