A tariff is imposed on a good. This will ________ the domestic producer surplus, ________ the domestic consumer surplus, and ________ total surplus in the home country.
A) increase; decrease; decrease
B) increase; decrease; increase
C) increase; remain unchanged; increase
D) increase; increase; increase

Question

Quizplus · Accepted Answer

A tariff on a good increases domestic producer surplus because it raises the price of imported goods, making domestic goods more competitive. It decreases domestic consumer surplus because consumers have to pay higher prices. Overall, it decreases total surplus due to the inefficiencies and deadweight loss introduced by the tariff.

A Tariff Is Imposed on a Good