Question

The United States and many other countries often impose trade sanctions on other countries. These sanctions A. tend to decrease consumer and producer surplus only in the sanctioned country. B. tend to decrease the deadweight loss. C. tend to increase total welfare. D. decrease producer and consumer surplus in both the sanctioned and sanctioning countries.

Answer 1

The correct answer is option D.

Step-by-step explanation:

Sanctions can be defined as penalty levied on other countries or citizens of other countries. There are a number of trade sanctions such as

1. Tariffs
2. Quotas
3. Non-tariff barriers
4. Embargoes

These trade sanctions affect both the sanctioning country as well as the sanctioned country. The imposition of trade sanctions on a country affects exports of the country. As the producers are able to supply less, there will be a reduction in producer surplus.

The imports for the consumers in the sanctioning country will decline. There will be less choice for them. This will cause a reduction in consumer surplus.