Assume that demand and supply curves are neither perfectly elastic or perfectly inelastic.

What are the effects of tariffs in an importing country?
Choose 1 answer:
(A) Consumer surplus decreases, producer surplus increases, tax revenue is generated, and total surplus decreases.
(B) Consumer surplus is unchanged, producer surplus increases, and total surplus increases.
(C) Consumer surplus decreases, producer surplus increases, and total surplus increases.
(D) Consumer surplus increases, producer surplus increases, and total surplus increases.
(E) Consumer surplus increases, producer surplus decreases, and total surplus decreases.

Question

Assume that demand and supply curves are neither perfectly elastic or perfectly inelastic.

What are the effects of tariffs in an importing country?
Choose 1 answer:
(A) Consumer surplus decreases, producer surplus increases, tax revenue is generated, and total surplus decreases.
(B) Consumer surplus is unchanged, producer surplus increases, and total surplus increases.
(C) Consumer surplus decreases, producer surplus increases, and total surplus increases.
(D) Consumer surplus increases, producer surplus increases, and total surplus increases.
(E) Consumer surplus increases, producer surplus decreases, and total surplus decreases.

Accepted Answer

∻Solution∻ ‖ a ⋮ Consumer Surplus: When a tariff is imposed, the price of the imported good increases. This leads to a decrease in consumer surplus because consumers now have to pay a higher price for the good. ‖ ‖ b ⋮ Producer Surplus: Domestic producers benefit from the tariff because the higher price makes their goods more competitive compared to the imported goods. This leads to an increase in producer surplus. ‖ ‖ c ⋮ Tax Revenue: The government generates tax revenue from the tariff, which is the product of the tariff rate and the quantity of the imported good. ‖ ‖ d ⋮ Total Surplus: The imposition of a tariff creates a deadweight loss, which is the loss of total surplus that occurs because the tariff distorts the market equilibrium. This results in a decrease in total surplus. ‖ ∻Answer∻ ⚹ (A) Consumer surplus decreases, producer surplus increases, tax revenue is generated, and total surplus decreases. ⚹ ∻Key Concept∻ ⚹ Tariffs and Market Surplus ⚹ ∻Explanation∻ ⚹ Tariffs increase the price of imported goods, reducing consumer surplus and increasing producer surplus. The government gains tax revenue, but the overall effect is a decrease in total surplus due to the deadweight loss created by the market distortion. ⚹◊How would the imposition of tariffs affect producer surplus in an importing country according to Microeconomics?⍭ Generate me a similar question◊

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