How does the imposition of a tariff on the market for cigarettes in Italy affect its consumers and producers?

Suppose the Italian government wants to curb consumption of international cigarettes, such as Marlboro, that are imported from countries like the United States. They may implement a protectionist measure, such as a tariff, or a tax on imports which is designed to restrict imports and raise government revenue, to accomplish this. For consumers, the prices become higher than before, and consumer surplus, the difference between the amount consumers are willing to pay and the amount they actually pay, is lost, however consumer welfare may actually improve in this scenario, as less cigarettes are now being purchased. Domestic producers gain revenue, as they can now produce at a higher output and sell at a higher price, however foreign producers lose out, as the tariff decreases the quantity demanded of their cigarettes.

Answered by Feo K. Economics tutor

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