The Effect of an Import Tariff on a Specific Imported

question 15

Multiple Choice

The effect of an import tariff on a specific imported good on (domestic) consumer and producer surplus can be summarized as follows:

• A)Consumer surplus is increased and producer surplus is decreased.
• B)Consumer surplus and producer surplus are both increased.
• C)Consumer surplus and producer surplus are both decreased.
• D)Consumer surplus is decreased and producer surplus is increased.
• E)There is no effect on either consumer or producer surplus.

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Definitions:

Average Tax Rate

The ratio of the total amount of taxes paid to the total tax base (taxable income or spending), reflecting the percentage of income paid in taxes.

Taxable Income

The amount of income that is used to calculate an individual's or a company's income tax due to the government.

Average Tax Rate

The fraction of total income that goes to taxes, calculated by dividing the total amount of taxes paid by the taxpayer's total income.

Interest Income

The income earned by an entity from its investments in interest-bearing financial assets such as bonds, loans, or savings accounts.