(Figure: A Tariff on Imports) Refer to the figure. Suppose the government interv
ID: 1223521 • Letter: #
Question
(Figure: A Tariff on Imports) Refer to the figure. Suppose the government intervenes with a $2 tariff; the total loss of consumer surplus as a result of the tariff is: $550 million. $150 million. $200 million. $350 million. When significant externalities exist: the market equilibrium is no longer efficient. the market equilibrium is only efficient if the externality is an external benefit. social surplus is not maximized. the government may increase efficiency by imposing a tax on the market in the case of a positive externality. I only II and IV only I and III only II, III, and IV onlyExplanation / Answer
(30) Option (3)
In present of any externality, the market equilibrium is socially inefficient, and it gives rise to a deadweight loss since social surplus is less than maximum. But in case of positive externality, government imposes a subsidy and not tax.
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