Chapter 44, Problem 3MCQ

To determine

The correct option for the resultant from US tariff on imported cars.

Answer to Problem 3MCQ

Option b is correct.

Explanation of Solution

Explanation for the correct option:

b.

Due to US tariffs the product cost that is imported from abroad increases. If a car is imported, then US tariffs will increase its price which is to be paid by the customer. Therefore, option b is correct.

Explanation for incorrect options:

a.

Profit for US car manufacturers will remain unaffected. Therefore, option a is the incorrect answer.

c.

Fewer cars would be imported due to higher prices. Therefore, option c is incorrect.

d.

Due to the high prices of imported cars, not everyone can afford imported cars which will not affect the demand for US-manufactured cars. Therefore, option d is incorrect.

e.

Due to high prices because of US tariffs cars from all sources cannot be traded. Therefore, option e is incorrect.

Economics Concept Introduction

International trade: International trade is an exchange of goods and services across nations. This is due to globalization and comparative advantage. It means goods are produced in one country and are sold in some other country.