If a good is imported into (small) 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 does not 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

The imposition of a tariff in country H raises the price of the good in country H, but it does not affect its price in country F. Therefore, option B is the correct answer. Option A is incorrect because the "Law of One Price" refers to the idea that the same good should have the same price in different locations when all other factors are equal, so a tariff would not necessarily affect this. Option C is incorrect because a tariff would not lower the price of the good in both countries. Option D could be true in some cases, but it is not always the case. Option E is incorrect because it implies that the tariff has opposite effects in the two countries, which is not necessarily true.

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