The United States places a tariff on imported Brazilian ethanol.The impact of this tariff on the domestic ethanol market is a _____ domestic price,_____ consumer surplus,and _____ producer surplus.

Question

Quizplus · Accepted Answer

The tariff on imported Brazilian ethanol would lead to a higher domestic price for ethanol because the tariff makes imported ethanol more expensive, which reduces the supply of ethanol in the domestic market. This increase in price leads to less consumer surplus because consumers have to pay more for ethanol or reduce their consumption. However, domestic producers benefit from the higher price, leading to more producer surplus as they can sell their ethanol at a higher price.

The United States Places a Tariff on Imported Brazilian Ethanol