A Tariff Designed to Eliminate Foreign Competition Completely Will Be

question 6

Multiple Choice

A tariff designed to eliminate foreign competition completely will be expected to raise:

• A) either a large or a small amount of revenue depending on the magnitude of the tariff imposed.
• B) a relatively large amount of tax revenue.
• C) an amount of revenue equal to the amount of the tariff multiplied by the volume of exports.
• D) a relatively small amount of tax revenue.

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Definitions:

Income Effect

Changes in economic or personal income and the resulting impact on how much of a product or service is sought after.

Substitution Effect

The change in consumption patterns due to a change in relative prices, leading consumers to substitute away from more expensive goods toward cheaper ones.

Total Utility

The total satisfaction or benefit received by consuming a certain quantity of goods or services.

Utils

A hypothetical unit of measure used to quantify the satisfaction or utility that a consumer derives from consuming a good or service.