Suppose Canada has a 12% tariff on foreign -made cotton clothing. If the tariff is raised to 20%, there will be a
In the Canadian price of cotton clothing, profits for domestic producers, and in deadweight loss.

Question

Quizplus · Accepted Answer

If the tariff is raised from 12% to 20%, this will increase the cost of foreign-made cotton clothing for Canadian consumers, leading to a rise in the Canadian price of cotton clothing. As a result, domestic producers will see their profits increase, since they will be able to charge higher prices without facing as much competition from foreign producers. However, this increase in tariffs will also lead to an increase in deadweight loss, as the higher prices will reduce consumer surplus and discourage some consumers from buying cotton clothing altogether.

Suppose Canada Has a 12% Tariff on Foreign -Made Cotton