Suppose that there two countries- country F and country A. the government of country levies the high

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Question:

Suppose that there two countries- country F and country A. the government of country levies the high tariff on the imported cheese of country A.
As a result, the imposition of tariff increases the world price level by the amount of tariff at which country F will now import a lower quantity.
At this new higher price levels, the domestic producers of country F will increase the quantity supplied and the domestic consumer will decrease the demand.
Thus, the imports will fall. Due to this in country F. the consumer surplus will decrease and producer surplus will increase. Now, suppose that government of country F passed a law reducing the tariff rate on cheese.
This decreases the price paid by the consumers for cheese importation. As a result, this will increase the consumers surplus.
This will decrease the producer's surplus in the country F because now, producers will supply less quantity due to lower tariffs.
This will benefit the consumers of the country F but It will not benefit the producers of the country F.
The reduction In tariff will benefit the producers of country A because now, they can export more at lower tariff and this increases the profits of the producers.
This will not affect the consumer of the country A. With the reduction of tariff, the revenue of the government of country F decreases. Thus, option B Is correct.
The following statements occur due to low tariff.
1. The price of cheese In country F would decrease. 2. The tax revenue for the country F would decrease. 3. Profits for country F cheese producers would decrease.