An excise tariff imposed on foreign competitors will:
A) increase domestic firms' profits at all levels of demand.
B) increase domestic firms' profits only when demand is high.
C) increase domestic firms' profits only when demand is low.
D) have no impact on domestic firms' profits when demand for domestic goods is high.

Question

Quizplus · Accepted Answer

An excise tariff on foreign competitors makes their goods more expensive, which can lead to increased demand for domestic firms' products regardless of the overall demand level. This can increase domestic firms' profits as their goods become relatively cheaper compared to the now more expensive foreign goods.

An Excise Tariff Imposed on Foreign Competitors Will