Question

When the government imposes a tariff on import, what happens?

• A. The domestic price is higher than the global price.

• B. The amount of import is less than that in free trade.

• C. There is tariff revenue to the government.

• D. all of the above

While working for Pepsico, after examining the data closely, Jim noticed that when the price of a can of Mountain Dew increased, the number of cans of Mountain Dew sold decreased. He correctly reports that there is a(n) _______ relationship between the price of a Mountain Dew and the number of cans of Mountain Dew sold.

• A. normal.

• B. positive.

• C. inverse/negative.

Answer 1

1. The answer is C, "There is tariff revenue to the government."

When government imposes tarriff on imports, the aim is to protect domestic industry. The imposition of tarrif raise the government tax revenue and reduces the imports.

2. The answer is "Inverse/ Negative relationship"

When price of can increases its quantity demanded decreases, This is called law of demand, which reflect inverse relationship between price and quantity demand of good.