If a good is imported into (large) country H from country F, then the imposition of a tariff in country H
A) raises the price of the good in both countries (the "Law of One Price").
B) raises the price in country H and cannot affect its price in country F.
C) lowers the price of the good in both countries.
D) lowers the price of the good in H and could raise it in F.
E) raises the price of the good in H and lowers it in F.

Question

Quizplus · Accepted Answer

A tariff imposed by a large country like H raises the price of the good domestically due to the added cost of the tariff. However, it can lower the price in the exporting country F because the demand from H decreases, leading to a surplus in F, which can drive prices down.

If a Good Is Imported into (Large) Country H from Country