If an economy is open to foreign trade of good X, imposing a tariff will reduce total surplus (total surplus being defined as consumer + producer surplus). Which of the following ideas best describes why we observe tariffs being use in practice? a. The government can be under political pressure to implement inefficient economic policy. b. The tariff revenue raised will outweigh efficiency losses. c. Economic analysis does not fully explain efficiency losses. d. Economic stability is not often a political incentive.
If an economy is open to foreign trade of good X, imposing a tariff will reduce total surplus (total surplus being defined as consumer + producer surplus). Which of the following ideas best describes why we observe tariffs being use in practice? a. The government can be under political pressure to implement inefficient economic policy. b. The tariff revenue raised will outweigh efficiency losses. c. Economic analysis does not fully explain efficiency losses. d. Economic stability is not often a political incentive.
Chapter1: Making Economics Decisions
Section: Chapter Questions
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If an economy is open to foreign trade of good X, imposing a tariff will reduce total surplus (total surplus being defined as consumer + producer surplus). Which of the following ideas best describes why we observe tariffs being use in practice?
a. The government can be under political pressure to implement inefficient economic policy.
b. The tariff revenue raised will outweigh efficiency losses.
c. Economic analysis does not fully explain efficiency losses.
d. Economic stability is not often a political incentive.
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The loss in consumer surplus due to tariff exceeds gain in welfare because of tariff revenue and producer surplus.
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