The "Buy American" provision in the 2009 stimulus package required that stimulus money be spent only on U.S.-made goods,effectively acting as a quota of zero imports when stimulus money was being spent.The "Buy American" provision would ________ consumer surplus and ________ producer surplus for industries that produced protected products in the United States.
A)increase; increase
B)increase; decrease
C)decrease; increase
D)decrease; decrease

Question

Quizplus · Accepted Answer

The Buy American provision would decrease consumer surplus because it limits choice and competition, meaning consumers would have to pay higher prices for American-made goods. It would increase producer surplus for industries that produced protected products in the United States because they would have less competition and be able to charge higher prices, resulting in more profit.

The "Buy American" Provision in the 2009 Stimulus Package Required