Question

Select all that apply

What are the four direct effects of a tariff?
A. A decline in imports
B. Tariff revenue
C. A decline in consumption
D. Increased domestic production
E. A rise in imports

Answer 1

A tariff reduction can lead to a decline in imports, tariff revenue, and consumption, but an increase in domestic production.

Step-by-step explanation:

A tariff reduction can have several effects on the equilibrium price and quantity of flat screen TVs:

1. A decline in imports: When the tariff is reduced, it becomes cheaper for the U.S. to import flat screen TVs, leading to an increase in imports.
2. Tariff revenue: With a lower tariff, the government collects less revenue from the tax on imported TVs.
3. A decline in consumption: As import prices decrease, American consumers may choose to buy more imported TVs, resulting in a decline in domestic consumption.
4. Increased domestic production: A reduction in tariffs can make it more difficult for domestic producers to compete with cheaper imports, potentially leading to a decline in domestic production.