A Country Produces Two Goods, Soda and Chips

question 149

Multiple Choice

A country produces two goods, soda and chips. It currently exports soda and imports chips. If it were to impose a tariff on chips,

• A)both imports of chips and exports of sodas would rise.
• B)imports of chips would rise, but exports of sodas would fall.
• C)imports of chips would fall, but exports of sodas would rise.
• D)both imports of chips and exports of sodas would fall.

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Definitions:

Utility

A measure of satisfaction or happiness that a consumer derives from consuming goods and services.

Income-Consumption Curve

Curve tracing the utility-maximizing combinations of two goods as a consumer’s income changes.

Utility-Maximizing

A principle or strategy of consumers making choices to achieve the highest overall level of satisfaction or utility from their available resources.

Inferior Good

An inferior good is a type of good for which demand decreases as the income of the individual increases, in contrast to a normal good.