CFA Practice Question

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CFA Practice Question

Assume a small country imposes a tariff.

After the tariff, the consumer surplus will decrease by ______.
A. F
B. E + F + G
C. B + E + F + G
Explanation: Consumer surplus will decrease if the price rises.

User Contributed Comments 4

User Comment
Mariana80 Why would B be added?
vinoth84 can anyoe help, why was B added to consumer surplus decrease?
birdperson the supply line would have intersected the demand line at the original price. Thus, everything above the dotted line (price without tariff) would have been consumer surplus -- so the loss includes B + E + F + G
ascruggs92 The entire area below the demand line but above the price (represented by the dotted line) is consumer surplus - A + D + B + E + F + G is there for the original consumer surplus. The Tariff reduces consumer surplus to just A & D
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