When a nation imports a good,its consumer surplus ________,and its producer surplus ________.
A) increases; increases
B) decreases; decreases
C) increases; decreases
D) decreases; increases
E) does not change; increases

Question

Quizplus · Accepted Answer

When a nation imports a good, the competition from foreign producers increases and drives down the price, causing an increase in consumer surplus. However, domestic producers may lose their market share and have to lower the price to remain competitive, leading to a decrease in producer surplus. Therefore, importing a good generally increases consumer surplus and decreases producer surplus, resulting in an overall increase in economic welfare.

When a Nation Imports a Good,its Consumer Surplus ________,And Its