To measure the impact of a tariff on the total welfare of society, we calculate the:
A) rise in consumer surplus plus the rise in producer surplus.
B) rise in producer surplus plus the increase in tariff revenue going to the government minus the loss of consumer surplus.
C) rise in government revenues plus the rise in consumer surplus.
D) total number of jobs saved by the tariff times the average wage.

Question

Quizplus · Accepted Answer

The total welfare of society can be measured by calculating the change in producer surplus, consumer surplus, and government revenue. A tariff increases the price of imported goods, which reduces the quantity of imports demanded and increases producer surplus. However, it also reduces the quantity of imports consumed, which decreases consumer surplus. Additionally, the government collects revenue from the tariff. Therefore, the best choice is B, which considers the increase in producer surplus, the increase in tariff revenue going to the government, and the decrease in consumer surplus.

To Measure the Impact of a Tariff on the Total