📚 Learning Guide
Effects of Tariffs on Markets
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How does the imposition of tariffs on imported shoes affect the domestic shoe market?

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Choose the Best Answer

A

Domestic prices decrease due to competition

B

Demand for domestic shoes increases

C

Quantity of imported shoes rises

D

Overall market equilibrium is unaffected

Understanding the Answer

Let's break down why this is correct

Answer

When the government imposes tariffs on imported shoes, it raises the price of those shoes in the domestic market. This means that people will likely buy fewer imported shoes because they are now more expensive. As a result, domestic shoe manufacturers may benefit since consumers might turn to buying shoes made in their own country, which could lead to increased sales for local businesses. For example, if a pair of imported shoes costs $100 with a tariff, and a similar pair made locally costs $80, many consumers may choose the cheaper local option. Overall, tariffs can protect domestic industries but may also lead to higher prices for consumers.

Detailed Explanation

When tariffs are added to imported shoes, they become more expensive. Other options are incorrect because Some might think that prices go down because of competition; It's a common mistake to believe that tariffs increase imports.

Key Concepts

Tariffs
Market Equilibrium
Consumer Behavior
Topic

Effects of Tariffs on Markets

Difficulty

medium level question

Cognitive Level

understand

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