Canada is a net importer of durable consumer goods (washing machines,refrigerators,etc.).If Canada,a small country in global markets,imposes a 10% tariff on these goods,we would expect to observe

Question

Quizplus · Accepted Answer

When a tariff is imposed, the cost of imported goods increases, making it more expensive for Canadian consumers to buy them. This leads to an increase in the price paid by Canadian consumers (D). Importing goods becomes more expensive due to the tariff, so Canadian consumers shift towards domestic production, leading to an increase in production of these goods in Canada. However, this increase in production is unlikely to offset the decrease in imports, so the total quantity of these goods available in the market falls, leading to an increase in their price. The demand curve for these goods is unlikely to shift due to the tariff, so (C) is not a correct answer. An increase in the quantity imported of these goods would only happen if the tariff was low enough that it did not significantly increase the cost of importing, so (B) is not a correct answer. Lastly, (E) is not a correct answer since the tariff would cause the price to increase, not decrease.

Canada Is a Net Importer of Durable Consumer Goods (Washing