If a small country imposes a tariff, then
A) the producers must suffer a loss.
B) the consumers must suffer a loss.
C) the government revenue must suffer a loss.
D) the demand curve must shift to the left.
E) the world price on that item will shift.

Question

Quizplus · Accepted Answer

When a small country imposes a tariff, the price of imported goods will increase, making it harder for people to buy them. This means that the consumers will suffer a loss, as they will end up paying more for the same goods than before. The producers, on the other hand, may benefit from the tariff as it protects them from foreign competition. The government may also benefit from the tariff, as it can collect revenue from the tax imposed. However, in most cases, the revenue generated is not enough to cover the loss suffered by the consumers, so the government may also end up suffering a loss. The demand curve may shift to the left as a result of the tariff, but this depends on the elasticity of demand. The world price may also shift, as the tariff may make the product less competitive in the international market.

If a Small Country Imposes a Tariff, Then