Scenario: You Learned in the Textbook That Protectionism Via an Imposed

question 232

Multiple Choice

Scenario: You learned in the textbook that protectionism via an imposed tariff is not free, since it interferes with market equilibrium and leads to a loss of social surplus in that market. A rationale for imposing a tariff is to shield domestic firms in a particular industry from foreign competition. But what if domestic firms that export goods and services rely on imported inputs in their production? The pie charts below shows that most U.S. exporters are also importers and vice versa.

(Source: J. Bradford Jensen, Importers are Exporters: Tariffs Would Hurt Our Most Competitive Firms, Trade and Investment Policy Watch, Peterson Institute of International Economics, December 7, 2016, https://piie.com/blogs/trade-investment-policy-watch/importers-are-exporters-tariffs-would-hurt-our-most-competitive.)
-Refer to the scenario above.Which of the following is a likely effect of a tariff on imported steel in the United States (a steel importing country) ?

• A) Domestic firms that use steel as inputs will benefit from a lower production cost.
• B) Domestic firms that use imported steel as an input will export less of their product.
• C) Domestic steel producers will lose some producer surplus.
• D) Domestic demand for steel will increase.

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