Asked by Bhanu Deep Juneja on Jun 11, 2024
Verified
Spain is an importer of computer chips, taking the world price of $10 per chip as given. Suppose Spain imposes a $5 tariff on chips. Which of the following outcomes is possible?
A) Spanish consumers of chips lose and Spanish producers of chips gain.
B) Fewer Spanish-produced chips are sold in Spain.
C) Spanish consumers and producers of chips gain.
D) Total surplus in the Spanish chip market increases.
Spanish Producers
Are businesses or individuals in Spain engaged in the creation or manufacturing of goods and services.
Spanish Consumers
Individuals or households in Spain that purchase goods and services for personal use.
Total Surplus
The combination of consumer and producer surplus in a market, symbolizing the overall net advantage to society derived from the creation and usage of a product or service.
- Develop an understanding of the repercussions of tariffs and import quotas on home markets, looking at the resultant variations in consumer surplus, producer surplus, and total surplus.
- Analyze the ramifications of open and restricted trade practices on local producers and consumers.
Verified Answer
DC
Dikira CherryJun 12, 2024
Final Answer :
A
Explanation :
Imposing a tariff on imported chips increases the price of chips in Spain, making imported chips more expensive. This hurts Spanish consumers, who now have to pay more for chips, but can benefit Spanish producers by making their chips relatively cheaper compared to the more expensive imported chips, potentially increasing their sales.
Learning Objectives
- Develop an understanding of the repercussions of tariffs and import quotas on home markets, looking at the resultant variations in consumer surplus, producer surplus, and total surplus.
- Analyze the ramifications of open and restricted trade practices on local producers and consumers.