Suppose that United States textile producers charge that foreign textile companies were dumping textile in the...

Suppose that United States textile producers charge that foreign textile companies were dumping textile in the US and as a result damaging US textile companies. The president of the United States then places new tariffs on textile. The analysis from the point of view of the US Market.

“In the output marker the new tariff would be expected to reduce the output of domestic textile producers. An increase in tariffs on textile also would reduce the employment of us workers in the textile industry and reduce rents of us workes.” (True, false, uncertain and why?) (be brief and to the point. Use well labeled and well described graphs illustrating the output market results of going from free trade to a tariff and one graph illustrating the labor market results.)

Expert Solution

When a tariff is placed in the market the import goods become very costly , since tariff is added to imports so price of imports rise in the domestic market . So price of the good rises in the domestic market also . Domestic demand for the goods fall but domestic quantity supplied of the good rises . Domestic producers supply more after price rise . So the domestic market price is higher after tariff and import falls since now domestic producers are supplying more .

It increases the output of domestic taxtile producers . It increases employment since domestic production rises . FALSE .

effects of tariff : consumer surplus falls , government revenue increases , producer surplus rises

Rahul Sunny answered 2 years ago

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