Why Do Tariffs Result in a Decrease in Consumer Surplus

question 91

Multiple Choice

Why do tariffs result in a decrease in consumer surplus?

• A)The price and the quantity consumed of the protected good increases.
• B)The price of the protected good increases and quantity consumed decreases.
• C)The price and the quantity consumed of the protected good decreases.
• D)The price of the protected good decreases and quantity consumed increases.

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Definitions:

External Costs

Costs generated by production or consumption activities that are not borne by the producer or consumer but by a third party or society at large.

Socially Desirable

Refers to actions or policies that are widely accepted and promoted by society because they are considered beneficial for the majority of its members.

Efficient

An attribute of systems, processes, or devices that use the least amount of inputs to achieve the highest amount of output or desired effect.

MSB

Marginal Social Benefit, referring to the additional benefit to society as a whole from consuming one more unit of a good.