A signifcant percentage of the US supply of handbag is imported. In order to sup

Question

A signifcant percentage of the US supply of handbag is imported. In order to support local production, Congress passed a trade restriction imposing an import tariff of $10.00 per unit. The international price of fuel oil is $21.00 per unit. This would cause . The quantity of handbag produced in the U.S, to increase and the total quantity imported to fall but consumer surplus will fall leading to a deadwcight loss. The quantity of handbag produced in the U.S, to increase and the total quantity imported to fall as a result the total surplus will decrease. The quantity of handbag produced in the U.S. to increase and the auantity imported to fall and even though the consumer surplus falls there arc NO deadweight losses. The quantity of handbag produced in the U.S, to increase and the quantity imported to fall and there would be NO deadwcight losscs. llt None of the above.

Explanation / Answer

Ans:

The quantity of handbag produced in the U.S. to increase and the total quantity imported to fall but consumer surplus will fall leading to a deadweight loss.

As a result of import tariff , the total quantity imported will fall and this increases the quantity produced in U.S.The increase in the price will decrease the consumer surplus leading to a deadweight loss.  

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