Tariffs. The Northern Lights Company is an importer and distributor of Scandinavian wool sweaters. The U.S. Commerce Department recently informed the company that it will be subject to a new 20% tariff on the import cost of woolen clothing. The company is concerned that the tariff will slow its sales growth, given the highly competitive nature of the clothing market. Relevant market demand and marginal revenue relations are:

The company's marginal cost equals import costs of $50 per unit, plus $10 to cover transportation, insurance, and related selling expenses. In addition these costs, the company's fixed costs, including a normal rate of return, come to $4 million per year on this product.

Question

Tariffs. The Northern Lights Company is an importer and distributor of Scandinavian wool sweaters. The U.S. Commerce Department recently informed the company that it will be subject to a new 20% tariff on the import cost of woolen clothing. The company is concerned that the tariff will slow its sales growth, given the highly competitive nature of the clothing market. Relevant market demand and marginal revenue relations are:
 
 The company's marginal cost equals import costs of $50 per unit, plus $10 to cover transportation, insurance, and related selling expenses. In addition these costs, the company's fixed costs, including a normal rate of return, come to $4 million per year on this product.

Quizplus · Accepted Answer

The Answer of Tariffs. The Northern Lights Company is an importer and distributor of Scandinavian wool sweaters. The U.S. Commerce Department recently informed the company that it will be subject to a new 20% tariff on the import cost of woolen clothing. The company is concerned that the tariff will slow its sales growth, given the highly competitive nature of the clothing market. Relevant market demand and marginal revenue relations are:
 
 The company's marginal cost equals import costs of $50 per unit, plus $10 to cover transportation, insurance, and related selling expenses. In addition these costs, the company's fixed costs, including a normal rate of return, come to $4 million per year on this product.

Tariffs the Northern Lights Company Is an Importer and Distributor