Final answer:
The producer surplus gain from an import tariff is the additional area between the supply curve and the new higher domestic price level, represented by the triangle PNoTrade, E, and D. This gain indicates a rise in profits for domestic producers as they sell their goods at a higher price, but at the cost of reducing consumer surplus.
Step-by-step explanation:
If an import tariff is set such that the effective domestic price is increased, the producer surplus gain represents the additional income producers receive above their costs of production. In the scenario where barriers to trade are imposed and the price rises to PNoTrade, producer surplus is represented by the area of the triangle formed by PNoTrade, E, and D. When comparing this triangle with the one formed before the imposition of the tariff (Ptrade, C, D), the difference in area represents the gain in producer surplus due to the increased price that domestic producers receive for their goods as a result of the tariff.
Producer surplus is essentially the profit producers earn above production costs. Therefore, by setting an import tariff, the domestic price gets higher, domestic supply increases, and the producer surplus increases as well, signifying a gain for domestic producers. On the other hand, consumer surplus decreases as consumers pay more for a lower quantity of goods, indicating an overall welfare loss in the economy.