In a small country, an export tariff will result in:
A) a consumption deadweight loss but no production deadweight loss.
B) a production deadweight loss but no consumption deadweight loss.
C) no production and consumption deadweight losses.
D) both production and consumption deadweight losses.

Question

Quizplus · Accepted Answer

An export tariff will increase the price of exports, making them less competitive in the international market. This will lead to a decrease in demand for the country's exports, resulting in a decrease in production and a deadweight loss. Additionally, the higher price of exports will also lead to a decrease in consumption by foreign countries, resulting in a deadweight loss. Therefore, both production and consumption deadweight losses will occur with an export tariff.

In a Small Country, an Export Tariff Will Result In