Question 24

The quantity of footwear produced domestically increases.

When an import tariff is placed on footwear, it raises the cost of imported goods, making domestic footwear more competitive. This leads to an increase in the quantity of footwear produced domestically.

A) Consumer surplus for footwear

Consumer surplus typically decreases when a tariff is enacted because consumers face higher prices for footwear. This results in a reduction in the overall benefit consumers receive from purchasing footwear, as they either pay more or buy less.

B) The domestic demand for footwear

The domestic demand for footwear does not necessarily increase due to a tariff. Instead, demand may remain the same or decrease as higher prices discourage some consumers from purchasing footwear, affecting overall consumption.

C) Producer surplus for footwear

Producer surplus for footwear increases when an import tariff is implemented. The higher prices for domestic products enable producers to benefit more from their sales, encouraging greater production and investment in the industry.

D) The quantity of footwear imported

The quantity of footwear imported decreases when a tariff is imposed, as the additional cost makes imported footwear less attractive to consumers. This reduction in imports is a direct effect of the tariff, counteracting any increase in domestic production.

Conclusion

The correct answer, C, highlights that producer surplus for footwear increases as a direct consequence of the import tariff, which protects domestic producers from foreign competition. All other options either misinterpret the effects of the tariff or fail to recognize the fundamental economic principles at play, thereby reinforcing why C is the definitive correct choice.