What are the effects of a tariff on a good on various groups and on the total surplus in the country that imposes the tariff?
What will be an ideal response?
Imposition of a tariff increases the price of the good in the importing country and makes sellers better off. Domestic sellers enjoy a greater surplus. Consumers have to pay a higher price for the imported good, so they are made worse off. The government earns revenue equal to the product of the tariff rate and the number of units of the good imported. Overall, due to the imposition of the tariff there is a fall in the total surplus compared to the pre-tariff situation. The loss in total surplus is referred to as the deadweight loss of the tariff.
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The return that the entrepreneur can obtain in the best alternative business is called the
A) normal profit. B) economic profit. C) marginal profit. D) marginal revenue.
All of the following are differences in capital flows today from the past, EXCEPT
A) the increasing variety of financial instruments. B) the larger number of companies listed on world stock exchanges. C) the need to protect from sudden changes in currency values. D) the problem of volatility in financial capital flows. E) the reduction in transaction costs for foreign investment.