The imposition of tariffs on imports results in deadweight welfare losses for the home economy.These losses consist of the:
A) Protective effect plus consumption effect
B) Redistribution effect plus revenue effect
C) Revenue effect plus protective effect
D) Consumption effect plus redistribution effect

Question

Quizplus · Accepted Answer

The deadweight welfare losses from tariffs consist of the protective effect (loss of efficiency due to resources being diverted to less efficient domestic production) and the consumption effect (loss of consumer surplus due to higher prices and reduced consumption).

The Imposition of Tariffs on Imports Results in Deadweight Welfare