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