Denmark is an importer of computer chips and adds a $5 per chip tariff to the world price of $12 per chip.Suppose Denmark removes the tariff.Which of the following outcomes is not possible?
A)More Danish-produced chips are sold in Denmark.
B)More foreign-produced chips are sold in Denmark.
C)Danish consumers of chips become better off.
D)Total surplus in the Danish chip market increases.

Question

Quizplus · Accepted Answer

Removing the tariff would make foreign-produced chips cheaper for Danish consumers, and so it is possible that more foreign-produced chips are sold in Denmark. However, it is unlikely that more Danish-produced chips would be sold in Denmark, as the removal of the tariff means that foreign producers can compete more effectively on price, and so Danish producers may struggle to maintain market share. Therefore, it is not impossible but it is less likely.

Denmark Is an Importer of Computer Chips and Adds a $5