Question

The United States has imposed a tariff of 51% on soft wood imports from Canada. The tariff caused imports of lumber to drop precipitously after only a few months. Additionally, the price of lumber rose significantly after only a few months.

1st attempt
Part 1 (1 point)

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Who benefited from this tariff?

Choose one or more:
A. U.S. soft wood producers
B. Canadian soft wood producers
C. U.S. soft wood consumers
D. non-Canadian foreign soft wood producers
Part 2 (1 point)

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Now suppose that the United States increases the tariff to 75% on soft wood imports from Canada. Which of the following is likely to occur in the United States?

Choose one:
A.   The average soft wood price will stay the same.
B.   Only domestically produced lumber will increase in price.
C.   The average soft wood price will increase.
D.   Only lumber produced in Canada will increase in price.
E.   Only lumber imported from non-Canadian foreign producers will increase in price.

Answer 1

Tariff raises the price of the imported good and so it is likely to benefit only the domestic producers. This is because they now receive a higher price for their product. Consumers are at a loss because they receive a lower quantity and pay a higher price. Foreign produces also face economic losses because receive a lower price after paying the tariff and their imports are reduced. Increase in the tariff also has similar effects by decreasing the welfare of consumers and foreign producers. Domestic prices is increased and domestic producers are better off

Option A is correct

Option C is correct.