A country produces two goods, soda and chips. It currently exports soda and imports chips. If it were to impose a tariff on chips,
A)both imports of chips and exports of sodas would rise.
B)imports of chips would rise, but exports of sodas would fall.
C)imports of chips would fall, but exports of sodas would rise.
D)both imports of chips and exports of sodas would fall.

Question

Quizplus · Accepted Answer

Imposing a tariff on chips would make imported chips more expensive, leading to a decrease in imports of chips. As the country exports soda, a decrease in its income from chips imports could lead to a decrease in the purchasing power of the countries importing soda from it, potentially reducing soda exports as well.

A Country Produces Two Goods, Soda and Chips