CFA Practice Question

There are 341 practice questions for this study session.

CFA Practice Question

Refer to the graph below. Suppose the initial supply and demand curves are S1 and D1 but then a tariff is imposed. The tariff will cause ______

A. S1 to shift to S0.
B. S1 to shift to S2.
C. D1 to shift to D2.
D. D1 to shift to D0.
Correct Answer: A

The tariff means that foreign producers will now supply the same quantity of imports only if they receive a price that is higher by the amount of the tariff. As a result, the supply curve for imports must shift up.

User Contributed Comments 1

User Comment
mikus Tariff is imposed on importers not foreign producers. hence, a tariff will result in higher price of imports which will cause a shift in supply curve from S1 to S0. Also, since the price of imports is now higher, quantity of imports will decrease which will cause a shift in demand curve from D1 to D0. Thoughts?
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