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AP Microeconomics Chapter 9 Quiz Mr. Grochowski H 507 Name:___ The low domestic price indicates that the country has a comparative advantage in producing the good and country become an exporter. As the market price is above the domestic price, the consumer surplus decreases. However, the producer surplus increases. Therefore, the total surplus is increased by exporting the good.
 * 1) 1 Explain the changes in consumer, producer, and total surplus when a domestic market enters the world market and the market price is above the domestic price.

When the government imposes a tariff or quota on a good, the total surplus will decrease. For the importing nation, it decreases the quantity of imports and increases the domestic price. It raises the producer surplus, but decreases the consumer surplus, so the total surplus decreases.
 * 1) 2 Explain show the changes in efficiency that occur when the government imposes a tariff or quota on a good domestically.

Back --> Tariffs is a tax on goods abroad and sold domestically. They both control the number of foreign products to enter the market. Quotas are less flexible and tariff is more.
 * 1) 3 How what is the differences and similarities between tariffs and quotas?