If the price of Canadian lumber (an import) increases as a result of the U.S. government imposing a tariff (which raises the price of lumber in the United States), the equilibrium price of hardwood flooring in the United States will _____, and the equilibrium quantity of hardwood flooring in the United States will _____.

Question

Quizplus · Accepted Answer

When the price of Canadian lumber increases due to a tariff, the cost of production for hardwood flooring in the U.S. also increases, leading to a higher equilibrium price. However, the higher price reduces demand, leading to a decrease in the equilibrium quantity.

If the Price of Canadian Lumber (An Import) Increases as a Result