Assume an economy is currently engaged in free trade but considering implementing a tariff on its main import, athletic shoes. with a tariff, price stays the same, decreases, increases, domestic production decreases, stays the same, increases, imports decrease, stay the same, increase, and the producer surplus decreases. stays the same. increases.

Price - increase

Domestic production- increase

Import- reduces

Producer surplus- increase

Explanation:

A tariff is a form of tax on import or export.

When a tariff is imposed on a good , the price of the good increases.

As a result of the tariff , the amount of the goods imported falls as the imported good is now more expensive. The quantity produced by domestic producers increases as consumers would now start demanding for the domestic good. Tariffs are sometimes enacted to discourage importation and encourage domestic production.

As a result of the price increase, producer surplus increases. The increase in price also increases output. The producer surplus is the difference between the price of a product and the least amount the producer is willing to sell his product.

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