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The domestic supply-and-demand diagram below represents a product in which the United States does not have a comparative advantage.
a. What impact do foreign imports have on domestic price and quantity?
Imports (increase/ reduce) the domestic price, (decreasing/increasing) consumption and (increase/decrease) production.
b. The diagram below shows a protective tariff that eliminates part of the imports that exist at the world price, P world.
c. What are the price-quantity effects of this tariff on the following? (Assume the country imposing the tariff is a small part of the world market.
d) Domestic consumers: Price will (select increase/not change/decrease) and quantity will (select increase/decrease)
e) Domestic producers: Price will (select increase/decrease/not change) and quantity will (select decrease/increase)
f) Foreign exporters: Price will (select decrease/increase/not change) and quantity will (select increase/decrease)
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