In 2007, European Union (EU) negotiators have offered to cut tariffs for Latin American bananas to avoid "banana wars". What are the effects of a cut in tariffs?

Question

Quizplus · Accepted Answer

A cut in tariffs would make it more economical for Latin American producers to export to the EU, leading to an increase in the quantity of bananas imported into the EU. This would likely result in lower prices for consumers due to increased competition, rather than an increase in prices as stated in choice C. Tariff revenue would decrease rather than increase with a cut in tariffs, making choice A incorrect. Choice B is also incorrect as a cut in tariffs would not necessarily lead to an increase in banana production within the EU.

In 2007, European Union (EU) Negotiators Have Offered to Cut