The diagram below shows the domestic demand and supply curves for cotton towels in Canada.The prevailing world price of cotton towels is PW.Assume that all cotton towels are identical.
FIGURE 34- 3
-What is a tariff?

Question

The diagram below shows the domestic demand and supply curves for cotton towels in Canada.The prevailing world price of cotton towels is PW.Assume that all cotton towels are identical.
  FIGURE 34- 3
-What is a tariff?

Quizplus · Accepted Answer

A tariff is a tax imposed on imported goods. In this case, if Canada were to impose a tariff on imported cotton towels, it would increase the price of imported towels and make them less competitive with domestically produced towels. This would lead to an increase in domestic production and a decrease in imports, shifting the domestic supply curve to the right and potentially increasing prices for consumers.

The Diagram Below Shows the Domestic Demand and Supply Curves