Mexico has imposed a tariff on the importation of chocolate. As a consequence of the tariff, a. Mexico as a whole is better off, since the tariff increases employment and production in the domestic chocolate industry. b. Mexico as a whole is better off, since the tariff results in tax revenue for the Mexican government. c. Mexico as a whole is worse off, since producer surplus and consumer surplus both decrease. d. Mexico as a whole is worse off, since the increase in producer surplus is smaller than the drop in consumer surplus plus tariff revenues.

Question

Elisa Finley

Business

28 August, 21:40

Mexico has imposed a tariff on the importation of chocolate. As a consequence of the tariff, a. Mexico as a whole is better off, since the tariff increases employment and production in the domestic chocolate industry. b. Mexico as a whole is better off, since the tariff results in tax revenue for the Mexican government. c. Mexico as a whole is worse off, since producer surplus and consumer surplus both decrease. d. Mexico as a whole is worse off, since the increase in producer surplus is smaller than the drop in consumer surplus plus tariff revenues.

+3

Answers (1)

Know the Answer?

Dario Flynn · Answer 1

c. Mexico as a whole is worse off, since producer surplus and consumer surplus both decrease.

Explanation:

Since Mexico has put a restriction on import of any goods and that the country in itself is not that capable of manufacturing the chocolate.

As their is immense demand of chocolate in that case the producers will not be able to manufacture and produce the chocolate products and that the consumers in the country are well linked to the consumption of chocolate, there will be less consumption also.

Accordingly neither the consumer surplus will arise nor will be the producer surplus.