The diagram below shows supply and demand curves for bicycles in the domestic Canadian market.Assume that all bicycles are identical.
FIGURE 34- 4
-For most products,Canada is a small economy with no market power in the global market.If Canada imposed a tariff on imported goods from a low- wage foreign country,this would

Question

The diagram below shows supply and demand curves for bicycles in the domestic Canadian market.Assume that all bicycles are identical.
  FIGURE 34- 4
-For most products,Canada is a small economy with no market power in the global market.If Canada imposed a tariff on imported goods from a low- wage foreign country,this would

Quizplus · Accepted Answer

If Canada imposed a tariff on imported goods from a low-wage foreign country, it would increase the Canadian price of the imported good. This is because the tariff would add to the cost of importing the goods, which would be passed on to the Canadian consumers in the form of higher prices. This would shift the demand curve to the left for imported bicycles, resulting in a decrease in imports and an increase in domestic production. However, this would not necessarily improve Canada's terms of trade or equalize the costs of production between the two countries.

The Diagram Below Shows Supply and Demand Curves for Bicycles