Question

A nation engages in international trade with its trading partners and is currently an importer of aluminum. Imposing an import tariff on aluminum will affect the domestic market for aluminum in which of the following ways?

Domestic Quantity Supplied Domestic Consumer Surplus Domestic Producer Surplus
A Increase Decrease Decrease
B Increase Decrease Increase
C No change Decrease Decrease
D Decrease Increase Decrease
E Decrease Increase Increase

A


a

B


b

C


c

D


d

E

Answer 1

Correct answer: B.

Reason: A tariff raises the domestic price of imported aluminum. Higher price induces more domestic production (domestic quantity supplied increases), reduces domestic consumption (consumer surplus falls), and raises producers' revenue (producer surplus increases).