65. If Country X increases the tariff on imported coffee, what will be the impact on the import and the production of coffee in Country X?
Answer: D
The amount of coffee imported to Country X will decrease, and the production of coffee in Country X will increase.
Increasing the tariff on imported coffee in Country X is likely to make foreign coffee more expensive, leading to a decrease in imports. Simultaneously, this protectionist measure encourages domestic producers to increase their output to meet the demand that would have been satisfied by imports.
A) The amount of coffee imported to Country X and the production of coffee in Country X will both decrease
This option is incorrect because while the import of coffee will decrease due to higher tariffs, the production of coffee in Country X is expected to increase as domestic producers respond to reduced competition from imports.
B) The amount of coffee imported to Country X will increase, and the production of coffee in Country X will decrease
This option is also incorrect as it contradicts the basic economic principle that higher tariffs generally lead to a decrease in imports, not an increase. Moreover, domestic production would not decrease; it would likely increase due to reduced competition.
C) The amount of coffee imported to Country X and the production of coffee in Country X will both increase
This option is incorrect because a tariff increase does not incentivize an increase in imports. In fact, it would drive imports down while domestic production would likely rise in response to the reduced availability of imported coffee.
D) The amount of coffee imported to Country X will decrease, and the production of coffee in Country X will increase
This option is correct, as it aligns with the expected economic outcomes of increasing tariffs. Higher tariffs on imports typically lead to reduced imports and stimulate domestic production as local producers capitalize on the decreased competition.
Conclusion
Option D is definitively the right choice because it accurately reflects the economic impact of increased tariffs on imports and domestic production. All other options fail to recognize the fundamental effects of tariffs, which typically decrease imports while encouraging local production to fill the gap left by foreign goods.