If Tariffs Are Used in an Attempt to Improve Country

question 34

Multiple Choice

If tariffs are used in an attempt to improve country A's balance of trade, and if exchange rates are flexible, the imposition of the tariffs will cause __________ in the value of A's currency relative to other currencies and, as a consequence, A's exports will __________.

• A) a decrease; decrease
• B) a decrease; increase
• C) an increase; decrease
• D) an increase; increase

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Definitions:

Differentiated

The process or strategy of making a product appear distinct from similar products offered by competitors in the market.

Total Revenue

The complete financial income a company collects from the marketplace by selling its goods or services, before any outlays are subtracted.

Total Cost

The sum of all costs incurred by a business in producing a specific level of output, including both fixed and variable costs.

Purely Competitive Firm

A market structure characterized by a large number of small firms, producing homogenous products, with no single firm able to influence market prices due to perfect competition.