The following table gives the hypothetical supply and demand of television sets in Guatemala. Guatemala is a small country that is unable to affect world prices. The world price (free-trade price) is $300 per TV set. Who will benefit from Guatemala's 100% tariff on imported TVs?
A) Guatemala's consumers
B) Guatemala's TV producers
C) Guatemala's TV importers
D) foreign TV manufacturers

Question

The following table gives the hypothetical supply and demand of television sets in Guatemala. Guatemala is a small country that is unable to affect world prices. The world price (free-trade price) is $300 per TV set.  Who will benefit from Guatemala's 100% tariff on imported TVs?
A) Guatemala's consumers 
B) Guatemala's TV producers 
C) Guatemala's TV importers 
D) foreign TV manufacturers

Quizplus · Accepted Answer

A 100% tariff on imported TVs means that the price of imported TVs in Guatemala will be $600 instead of $300. This makes it more expensive for Guatemalan consumers to buy imported TVs, so they are likely to switch to buying TVs from domestic producers. This increase in demand benefits Guatemala's TV producers as they can now sell their TVs at a higher price ($600) and increase their profits. Importers and foreign TV manufacturers, on the other hand, will be negatively affected as their sales in Guatemala will decrease due to the higher price.

The Following Table Gives the Hypothetical Supply and Demand of Television