📚 Learning Guide
Effects of Tariffs on Trade
easy

Order the steps that occur when a tariff is imposed on imported goods, starting from the initial market conditions.

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Choose the Best Answer

A

New tariff is introduced, raising the price of imported goods

B

Domestic producers increase production due to less foreign competition

C

Consumer demand for imported goods decreases

D

Domestic prices of goods rise, affecting consumer surplus

Understanding the Answer

Let's break down why this is correct

Answer

When a tariff is imposed on imported goods, it starts with the initial market conditions where consumers have access to both domestic and foreign products at certain prices. The government decides to add a tax on the imported goods, which raises their prices. As a result, consumers may start choosing cheaper domestic products instead of the more expensive imported ones, leading to an increase in demand for local goods. This shift can help domestic producers, who might hire more workers or expand their production to meet the new demand. For example, if a tariff is placed on imported steel, local steel manufacturers could see a boost in sales as construction companies turn to them for supplies.

Detailed Explanation

When a tariff is added, it makes imported goods more expensive. Other options are incorrect because Some might think that domestic producers will immediately make more goods; It's easy to assume that people will stop buying imports right away.

Key Concepts

Effects of Tariffs on Trade
Supply and Demand
Consumer and Producer Surplus
Topic

Effects of Tariffs on Trade

Difficulty

easy level question

Cognitive Level

understand

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