When a country that imports a particular good imposes a tariff on that good,
A)producer surplus increases and total surplus increases in the market for that good.
B)producer surplus increases and total surplus decreases in the market for that good.
C)producer surplus decreases and total surplus increases in the market for that good.
D)producer surplus decreases and total surplus decreases in the market for that good.

Question

Quizplus · Accepted Answer

When a country that imports a particular good imposes a tariff on that good, it raises the cost of producing the good, which reduces the quantity demanded and shifts the supply curve leftward. As the equilibrium price increases, producer surplus increases, but consumer surplus decreases, resulting in a net loss of total surplus. Therefore, producer surplus increases, and total surplus decreases in the market for that good.

When a Country That Imports a Particular Good Imposes a Tariff