Trade and Tariffs

What is the total economic surplus defined by in a market?

• Area between the supply and demand curves

• Area below the supply curve

• Area above the demand curve

• Area above the supply curve and below the demand curve

What happens to the total economic surplus when a market opens up to the world price?

• It becomes zero

• It increases

• It remains the same

• It decreases

What is the purpose of enacting a tariff on imported goods?

• To decrease government revenue

• To reduce total economic surplus

• To increase consumer surplus

• To protect domestic industry

What happens to the consumer surplus when a tariff is imposed on imported goods?

• It becomes zero

• It increases

• It decreases

• It remains the same

What is the government revenue from a tariff calculated as?

• Tariff amount added to consumer surplus

• Tariff amount divided by total economic surplus

• Tariff amount multiplied by imported quantity

• Tariff amount multiplied by domestic production

What is the deadweight loss in a market due to a tariff?

• The area of deadweight loss is not affected by a tariff

• The area of total economic surplus

• The area of government revenue

• The area of consumer surplus

What is the effect of opening up to trade on the total economic surplus?

• It always increases

• It always decreases

• It remains constant

• It depends on the size of the market

What is the impact of a tariff on the producer surplus?

• It remains the same

• It decreases

• It increases

• It becomes zero

What is the purpose of enacting a quota on imports?

• To increase total economic surplus

• To increase government revenue

• To protect domestic industry

• To reduce consumer surplus

What is the effect of a quota on the total amount of imports?

• It remains the same

• It becomes zero

• It decreases

• It increases