An import tariff will producer surplus, consumer surplus, government revenue, an

Question

An import tariff will producer surplus, consumer surplus, government revenue, and overall domestic national welfare. increase; decrease; increase; have an ambiguous effect on increase; decrease; decrease; decrease increase; decrease; have no effect on; have an ambiguous effect on increase; decrease; have no effect on; decrease increase; increase; decrease; have an ambiguous effect on An export subsidy will producer surplus, consumer surplus, government revenue, and overall domestic national welfare. increase; decrease; increase; have an ambiguous effect on increase; decrease; decrease; decrease increase; decrease; have no effect on; have an ambiguous effect on increase; decrease; have no effect on; decrease increase; increase; decrease; have an ambiguous effect on An import quota will producer surplus, consumer surplus, government revenue, and overall domestic national welfare. increase; decrease; increase; have an ambiguous effect on increase; decrease; decrease; decrease increase; decrease; have no effect on; have an ambiguous effect on increase; decrease; have no effect on; decrease increase; increase; decrease; have an ambiguous effect on

Explanation / Answer

Answers:

1) An import tariff will increase producer surplus, decrease consumer surplus, increase government revenue, and have an ambiguous effect on overall domestic national welfare.

A) increase; decrease; increase; have an ambiguous effect on

Producers in the importing country are better-off as a result of the tariff. The increase in the price of their product increases producer surplus. Consumers of the product in the importing country are worse-off as a result of the tariff. That is the increase in the domestic price of both imported goods and the domestic substitutes reduces consumer surplus in the country. The government receives tariff revenue as a result of the tariff. Therefore, its revenue will increases and have an ambiguous effect on overall domestic national welfare in the country.

2) An export subsidy will increase producer surplus, decrease Consumer surplus, decrease government revenue, and decrease overall domestic national welfare.

B) increase; decrease; decrease; decrease

    The country gives subsidy on exports, means that increases its expenditure. So, it leads to reduce its revenue, and consumers should pay more taxes and the overall domestic national welfare will decrease. The producer only will beneficial in this situation.

3) An import quota will increase producer surplus, decrease Consumer surplus, have no effect on government revenue, and have an ambiguous effect on overall domestic national welfare.

C) increase; decrease; have no effect on; have an ambiguous effect on

    The producer will get benefits during the import quotas, means that he receives the goods and services with lower prices. It leads to burden to the Consumers, but no effect on government revenue and have an ambiguous effect on overall domestic national welfare in the country.

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