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Question
Microeconomics
Posted 2 months ago

Which of the following best describes the effect of a tariff?
Choose 1 answer:
A It decreases the domestic price of a good and has no effect on total surplus.
B) It increases the quantity of a good bought in a country and increases tax revenue
(c) It decreases the quantity of a good bought in a country and decreases tax revenue.
D) It alters the behavior of buyers but not sellers.
(E) It increases the domestic price of a good and decreases total surplus.
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Answer from Sia
Posted 2 months ago
Solution
a
Tariff Definition: A tariff is a tax imposed on imported goods, which typically increases the price of the imported goods in the domestic market
b
Effect on Domestic Price: The imposition of a tariff increases the domestic price of the good because the tax is added to the cost of the imported goods
c
Effect on Quantity Bought: Higher prices due to the tariff generally lead to a decrease in the quantity of the good bought in the country
d
Effect on Total Surplus: The increase in price and decrease in quantity bought result in a loss of consumer and producer surplus, leading to a decrease in total surplus
Answer
(E) It increases the domestic price of a good and decreases total surplus.
Key Concept
Tariff Effects
Explanation
A tariff increases the domestic price of imported goods, reduces the quantity bought, and decreases total surplus due to the loss in consumer and producer surplus.

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