Question

Assume that tomatoes are currently imported from abroad at a market price of $ .50 per tomato. Assume that a tariff of $ .25 is placed on imported tomatoes. Also assume that the supply and demand for tomatoes are normal supply and demand relationships. What will be the effect of the tariff on the price of tomatoes in the U.S. and to the price received by foreign exporters of tomatoes?

Answer 1

Increases the price of tomatoes in the U.S.

Decrease the price received by foreign exporters of tomatoes.

Step-by-step explanation:

Tariff refers to a tax or duty is charged on some imported goods. It is usually used to discourage the importation of the goods.

The effect of the tariff $0.25 will be an increase in the price of tomatoes in the U.S. However, it will lead to a decrease in the price received by foreign exporters of tomatoes.

The reason is that the supply and demand for tomatoes are normal supply and demand relationships which will make the foreign exporter to bear the higher burden of the tariff.