Question

When a tariff is introduced, the sum of consumer surplus and producer surplus is ______ than that of a closed economy and ______ than that of a fully open economy.

		greater; less
		less; less
		greater; greater
		less; greater

Answer 1

less; greater

(In a closed economy there is no exports and imports activities but because of introduction of tariffs the people are less willing to buy and consumer surplus and producer surplus goes down or less. On the other hand in a fully open economy tariffs are operated to restrict the imports and as a result domestic producer benefitted and not reduce their price. Hence, the consumer surplus and producer surplus are higher)...

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