Suppose a Government Imposes an Import Tariff That Is Too

question 160

Multiple Choice

Suppose a government imposes an import tariff that is too large and exceeds the tax required to completely shut down foreign imports. What is the impact of this mistake on the market outcome?

• A) The impact is the same as intended-there are no imports and the domestic market clears at the domestic equilibrium price.
• B) The domestic price rises above the domestic equilibrium price, which results in an excess supply.
• C) The domestic and foreign prices rise and cause consumer surplus losses in exporting and importing regions.
• D) The domestic price rises above the domestic equilibrium price, which results in an excess demand.

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Definitions:

Outcome Variable

The variable that is being measured or observed in a study to determine the effects of the independent variable; also known as the dependent variable.

Independent Variable

A variable that is manipulated or categorized to observe its effect on the dependent variable in experimental research.

Slope

The measure of the steepness or incline of a line, representing the rate of change of one variable with respect to another.

Intercept

In statistics and mathematics, the point at which a line crosses the vertical axis of a graph, indicating the value of the dependent variable when all independent variables are zero.