Principles of Macroeconomics 7th Edition

Published by South-Western College
ISBN 10: 1-28516-591-8
ISBN 13: 978-1-28516-591-2

Chapter 9 - Application: International Trade - Questions For Review - Page 189: 4

Answer

A tariff is a tax placed on goods produced abroad and sold domestically. If a country imports a good a tariff will cause them to import less this causes consumers to be harmed while producers and government benefit from additional revenue.

Work Step by Step

Tariffs cause a closer reach to equilibrium domestic price because it raises costs that an importing nation would naturally have higher because it is the reason they import in the first place. This will reduce the benefit to producers because they do not always get the cheapest price due to less units so domestic producers and the government benefit off of this.
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