What is the general effect on imports when a tariff is imposed?

What is the general effect on imports when a tariff is imposed?

• A. Imported quantity rises and prices rise.
• B. Imports remain unchanged.
• C. Imported quantity falls and prices rise.
• D. Imported quantity falls and prices fall.

Answer: (C)

Imposing a tariff creates a price wedge that makes imported goods more expensive. With higher prices, buyers curb their import purchases or switch to domestically produced goods, so the quantity of imports falls. At the same time, the price in the home market rises because the tariff is a tax on each imported unit. So you get fewer imports and higher prices for those goods overall. The magnitude depends on how sensitive buyers and sellers are to price changes, but the general outcome is a drop in imports and an increase in prices.

Imposing a tariff creates a price wedge that makes imported goods more expensive. With higher prices, buyers curb their import purchases or switch to domestically produced goods, so the quantity of imports falls. At the same time, the price in the home market rises because the tariff is a tax on each imported unit. So you get fewer imports and higher prices for those goods overall. The magnitude depends on how sensitive buyers and sellers are to price changes, but the general outcome is a drop in imports and an increase in prices.