Tariff Reduction and Trade Surpluses Steps:

• Lowering the tariff from 10% to 5% reduces the cost of Indian imports in the US.
• Cheaper imports increase the quantity imported, shifting the supply curve rightward.
• Greater import competition lowers domestic prices and sales for US producers, reducing their surplus.
• US consumers gain from lower prices and more choices, increasing their surplus.

Why B is correct:

• In trade theory, tariff cuts decrease producer surplus by exposing domestic firms to more competition while increasing consumer surplus via lower prices and higher quantity.

Why the others are wrong:

• A: Consumer surplus increases, not stays the same, due to cheaper goods.
• C: Producer surplus decreases from import competition, not increases.
• D: Producer surplus decreases and consumer surplus increases, not no change for consumers.

Final answer: B