What are the effects of a tariff on a good on various groups and on the total surplus in the country that imposes the tariff?
What will be an ideal response?
Imposition of a tariff increases the price of the good in the importing country and makes sellers better off. Domestic sellers enjoy a greater surplus. Consumers have to pay a higher price for the imported good, so they are made worse off. The government earns revenue equal to the product of the tariff rate and the number of units of the good imported. Overall, due to the imposition of the tariff there is a fall in the total surplus compared to the pre-tariff situation. The loss in total surplus is referred to as the deadweight loss of the tariff.
You might also like to view...
The excess reserves ratio is ________ related to expected deposit outflows, and is ________ related to the market interest rate
A) negatively; negatively B) negatively; positively C) positively; negatively D) positively; positively
An increase in the U.S. price level, other things constant, will _____
a. increase U.S. exports and decrease U.S. imports b. increase U.S. exports and leave U.S. imports unchanged c. decrease U.S. exports and increase U.S. imports d. decrease U.S. exports and leave U.S. imports unchanged e. leave both U.S. exports and U.S. imports unchanged
If a government-imposed price floor legally sets the price of milk above market equilibrium, which of the following will most likely happen?
a. The quantity of milk demanded will increase. b. The quantity of milk supplied will decrease. c. There will be a surplus of milk. d. There will be a shortage of milk.
If aggregate expenditures are lower than real GDP:
A. actual real output is less than equilibrium real output. B. aggregate output increases. C. employment increases. D. there will be unplanned increases in inventories.