Suppose the United States levies a tariff, t, on automobiles. Which of the following correctly describes the effect on the tariff?
A) U.S. consumers will suffer from the tariff because now they will pay a higher price, P(world) + t, for foreign cars.
B) The tariff has no effect on U.S. consumers because they still will buy foreign cars at the world price, P(world) .
C) The tariff benefits U.S. consumers because they will pay a lower price, P(world) -- t, for foreign cars.
D) The tariff benefits U.S. foreign producers of automobiles because they will now sell cars at a higher price, P(world) + t, to the U.S. consumers.
Correct Answer:
Verified
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