Spain is an importer of computer chips,taking the world price of $12 per chip as given.Suppose Spain imposes a $5 tariff on chips.As a result,
A)Spanish consumers of chips and Spanish producers of chips both gain.
B)Spanish consumers of chips gain and Spanish producers of chips lose.
C)Spanish consumers of chips lose and Spanish producers of chips gain.
D)Spanish consumers of chips and Spanish producers of chips both lose.

Question

Quizplus · Accepted Answer

The imposition of a $5 tariff on chips will raise the price of chips in Spain by $5, from $12 to $17 per chip. As a result, Spanish consumers of chips will face a higher price and will therefore lose. However, the higher price will also make it more profitable for Spanish producers of chips to produce chips, and they will therefore gain. Thus, Spanish consumers of chips lose and Spanish producers of chips gain, making option C the correct answer.

Spain Is an Importer of Computer Chips,taking the World Price