Refer to Figure 34- 1. Suppose that P0 is the world price. If Canada imposes a tariff causing the price of refrigerators in Canada to rise from P0 to P1, the consequence would be that

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When the domestic price rises due to the tariff, it becomes more profitable for domestic producers to increase production. As a result, domestic production increases from Q1 to Q2. However, at the higher price, domestic consumers will buy fewer refrigerators, so domestic consumption falls from Q5 to Q4. The increase in domestic production is not enough to meet domestic demand, so imports (represented by the gap between Q2 and Q4) continue to be necessary. Therefore, domestic production will not exceed domestic consumption, and both domestic production and consumption will not increase or decrease by equal amounts.