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Answer: Domestic producers realize an increase in producer surplus.
The correct answer is **C** because a small country, being a price taker, cannot influence the world market price. The imposition of a tariff leads to the following welfare effects: 1. **Consumers**: Suffer a loss of consumer surplus due to higher prices. 2. **Domestic Producers**: Gain producer surplus as they are protected from foreign competition. 3. **Net Welfare Effect**: Results in a deadweight loss to the country's welfare, as the gains to producers and government revenue do not offset the losses to consumers. This scenario highlights the economic implications of trade restrictions like tariffs, particularly for small countries.
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When a small country, acting as a price taker, imposes a tariff on an imported good, which of the following outcomes is most likely?
A
National welfare increases.
B
Consumers experience a gain in consumer surplus.
C
Domestic producers realize an increase in producer surplus.