📚 Learning Guide
Effects of Tariffs on Markets
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Arrange the following steps that illustrate the impact of a tariff on the market for imported shoes, from the imposition of the tariff to its eventual impact on domestic producers.

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Choose the Best Answer

A

Imposition of tariff → Increased price of imported shoes → Decreased demand for imported shoes → Increased demand for domestic shoes

B

Imposition of tariff → Decreased price of imported shoes → Increased demand for imported shoes → Increased demand for domestic shoes

C

Imposition of tariff → Increased demand for imported shoes → Increased price of imported shoes → Increased demand for domestic shoes

D

Imposition of tariff → Stable price for imported shoes → Decreased demand for domestic shoes → Increased supply of imported shoes

Understanding the Answer

Let's break down why this is correct

Answer

When a tariff is imposed on imported shoes, it means that an extra tax is added to the price of those shoes when they come into the country. This makes imported shoes more expensive for consumers, leading some people to buy fewer of them. As a result, domestic shoe producers can sell more of their products since they are now more competitively priced compared to the expensive imported shoes. Over time, this can lead to increased production by domestic companies and potentially more jobs in that industry. For example, if a tariff raises the price of imported shoes from $50 to $70, consumers might choose to buy more domestic shoes priced at $60 instead.

Detailed Explanation

When a tariff is added, the price of imported shoes goes up. Other options are incorrect because This answer suggests that the price of imported shoes goes down, which is not true; This option says demand for imported shoes increases, which is incorrect.

Key Concepts

Tariffs and their economic impact
Supply and demand dynamics
Market equilibrium effects
Topic

Effects of Tariffs on Markets

Difficulty

medium level question

Cognitive Level

understand

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