Asked by levana znaty on May 11, 2024
Verified
When a country that imported a particular good abandons a free-trade policy and adopts a no-trade policy,
A) consumer surplus increases and total surplus increases in the market for that good.
B) consumer surplus increases and total surplus decreases in the market for that good.
C) consumer surplus decreases and total surplus increases in the market for that good.
D) consumer surplus decreases and total surplus decreases in the market for that good.
Consumer Surplus
The imbalance between what consumers are willing and financially able to invest in a good or service against what they really spend.
Total Surplus
The sum of consumer surplus and producer surplus in a market, measuring the total net benefit to society from the production and consumption of a good or service.
Free-Trade Policy
Economic policies that eliminate tariffs and trade barriers between countries to encourage trade and economic integration.
- Learn about the effects that tariffs and import quotas have on internal markets, particularly in terms of consumer surplus, producer surplus, and aggregate surplus modifications.
- Scrutinize the outcomes of trade (both liberal and limited) on internal producers and consumers.
Verified Answer
AM
Amber MoreheadMay 15, 2024
Final Answer :
D
Explanation :
When a country moves from a free-trade policy to a no-trade policy, consumer surplus typically decreases because consumers now have less access to goods and often have to pay higher prices for domestically produced alternatives. Total surplus also decreases because the economy loses the efficiency gains from trade, such as specialization and the allocation of resources according to comparative advantage.
Learning Objectives
- Learn about the effects that tariffs and import quotas have on internal markets, particularly in terms of consumer surplus, producer surplus, and aggregate surplus modifications.
- Scrutinize the outcomes of trade (both liberal and limited) on internal producers and consumers.