Import restrictions due to the imposition of tariffs by the U.S. government
A) will ultimately cause inefficient resource allocation in the United States.
B) will lead to lower incomes in the economy of U.S. trade partners.
C) will lead to a decline in the quantity of the product consumed in the United States.
D) All of the above are likely to occur.

Question

Quizplus · Accepted Answer

When the U.S. government imposes tariffs and restrictions on imports, it leads to inefficient resource allocation within the U.S. economy. This is because domestic producers who were previously inefficient now have a competitive advantage due to reduced foreign competition, resulting in higher prices and lower-quality goods. Lower incomes in U.S. trading partners may also occur due to the decline in trade and a reduction in exports to the U.S. Finally, a decline in the quantity of goods consumed in the U.S. is also likely to occur, as prices rise and consumers are forced to reduce their consumption due to the higher cost of imported goods. Therefore, all of these outcomes are likely when import restrictions are imposed by the U.S. government.

Import Restrictions Due to the Imposition of Tariffs by the U.S