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.
By increasing the tariff on imported coffee, Country X effectively raises the cost of foreign coffee, leading to a decrease in imports. This situation incentivizes domestic producers to increase their production to meet consumer demand.
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 importation of coffee is expected to decrease due to the increased tariff, it does not logically follow that domestic production would also decrease. In fact, domestic producers are likely to ramp up production in response 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 incorrect as it contradicts the effects of imposing a tariff. An increase in tariffs would not lead to an increase in imports; rather, it would discourage imports and likely lead to an increase in domestic production.
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 it misrepresents the impact of a tariff. A tariff on imports raises prices, making imported coffee less attractive, which would not result in an increase in either imports or domestic production.
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 accurately reflects economic theory regarding tariffs. An increase in tariffs on imported coffee raises the cost, leading to a decrease in imports while encouraging domestic producers to increase their output to fill the gap left by reduced imports.
Conclusion
The correct answer, option D, illustrates the economic principle that tariffs protect domestic industries by making imports more expensive, thereby reducing their quantity and stimulating local production. Other options incorrectly suggest increases in imports or decreases in domestic production, which are not aligned with the expected outcomes of an increased tariff.