CFA Practice Question

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CFA Practice Question

Which trade policy will decrease consumer surplus?

I. Tariff
II. Import quota
III. Export subsidy
Correct Answer: I, II, III and IV

User Contributed Comments 3

User Comment
something Can someone explain III and IV.
uvp5003 Makes it a little easier if you think of this graphically for an export subsidy - it causes a shift to the left of the supply curve, effectively reducing the area above the supply curve aka reducing the consumer surplus.

A VER has effectively the same impact as a quota, but instead of being imposed by the importer, it's imposed by the exporter. So the logic you used to justify a quota is the same logic you would use to justify a VER for this question.
khalifa92 all decrease consumer surplus but increase producer surplus
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