Suppose that the United States eliminated its tariff on automobiles,granting foreign-produced automobiles free entry into the U.S.market.Which of the following would be most likely to occur?

Question

Quizplus · Accepted Answer

By eliminating the tariff on foreign-produced automobiles, the supply of automobiles in the U.S. market would increase, which would drive down the price of automobiles for U.S. consumers. This lower price would increase the demand for automobiles, both foreign-produced and domestic-produced, and would not have a direct effect on the demand for U.S. export products. However, as consumers have more money available from paying a lower price for automobiles, they may be more likely to purchase U.S. export products, leading to an increase in demand for those products indirectly.

Suppose That the United States Eliminated Its Tariff on Automobiles,granting