If the United States increases tariffs on imports of lumber from Canada (which raises the price of lumber in the United States),the equilibrium price of new homes in the United States will _____ and the equilibrium quantity of new homes in the United States will _____.
A)increase;increase
B)increase;decrease
C)decrease;increase
D)decrease;decrease

Question

Quizplus · Accepted Answer

Increasing tariffs on lumber imports from Canada would raise the cost of lumber in the United States. Since lumber is a primary material in home construction, this would increase the cost of building new homes, leading to a higher equilibrium price for new homes. However, the higher costs would likely reduce the quantity of new homes built, leading to a decrease in the equilibrium quantity of new homes.

If the United States Increases Tariffs on Imports of Lumber