Question

2. Suppose a small country like Gambia imposes a tariff on its imports of Cloth from...

2. Suppose a small country like Gambia imposes a tariff on its imports of Cloth from the USA.

A. What will happen to domestic price of cloth in the Gambia? Will it increase or decrease?

Explain why?

B. Who will be happy with the imposition of the tariff on imports domestic consumers or domestic producers in Gambia? Explain why?

C. Why will the government of Gambia be happy with the imposition of the tariff?

Explain, why?

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Homework Answers

Answer #1

Answer- A

If Gambua imposes tarris on its imports of cloth from the USA, It will increase the prices of cloths in domestic market. Tarriffs are imposes as tax on imports from foreign producers but it doesn't force domestic producers to reduce prices. Foreign producers increases the prices to fulfill losses from tarriff. Overall prices increases in domestic market.

Answer-B

Imposing of tarriff is beneficial for domestic producers because tarriff increases prices of imported products and make domestic products more competitive with imports. It reduces imports and increase domestic production. It protects infant domestic industries and make them able to compete with big MNCs.

Answer-C

Government of Gambia will be happy by imposing tarriff because tarriff is a tax and it will increase government's revenue and helping in development of the country.

Tarriff are also used as a protective measure of certain strategic important industries, those supporting national security.

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