If the imposition of tariff on a commodity alters the relative prices of the imposing country's exports to its imports, it is referred to as the:
A)total price effect of the tariff.
B)production effect of the tariff.
C)consumption effect of the tariff.
D)terms-of-trade effect of the tariff.

Question

Quizplus · Accepted Answer

The terms-of-trade effect of a tariff refers to the impact that the tariff has on the ratio at which a country can exchange its exports for imports. By imposing a tariff, a country is effectively increasing the price of its imports relative to its exports, which can result in an improvement in its terms of trade. This effect depends on the elasticities of supply and demand for the goods in question, as well as the degree of market power held by the importing and exporting countries.

If the Imposition of Tariff on a Commodity Alters the Relative