The decline in import volumes as a result of the imposition of a tariff is attributed to the :
A)production effect of a tariff
B)trade effect of a tariff
C)revenue effect of a tariff
D)consumption effect of a tariff

Question

Quizplus · Accepted Answer

The trade effect of a tariff refers to the change in import and export volumes resulting from the imposition of a tariff. Tariffs increase the cost of imports, making them less competitive in the domestic market. As a result, consumers may shift their demand to domestically produced goods, causing a decline in import volumes. This is different from the production effect of a tariff which refers to the increase in domestic production resulting from the imposition of a tariff. The revenue effect of a tariff refers to the revenue generated from the tariffs, while the consumption effect of a tariff refers to the change in consumer surplus resulting from the tariff.

The Decline in Import Volumes as a Result of the Imposition