Suppose the United States imposes a $10 per barrel tariff on imported refined oil products. a. what...

Question

Suppose the United States imposes a $10 per barrel tariff on imported refined oil products.

a. what is the short run profit outlook for American refineries? what is the long term profit outlook?

b. supposes that eight years after imposing this tariff, the United States revokes it. What is likely to happen to the refining industry at that time?

Robert · Accepted Answer

ANSWER 
In the short run, the American refineries will witness an increase in demand and hence an increase in 
profit. This is because an imposition of tariff on the imported products will increase the price of 
those products. The local goods will be more attractive to the consumer. This can be understood 
with the help of an example. Suppose the price of local goods is $30 while the price of imported 
goods is $25, an imposition of $10 tariff will increase the price of imported goods to $35.

Suppose the United States imposes a $10 per barrel tariff on imported refined oil products. a. what is the short run profit outlook for American refineries? what is the long term profit outlook? b....

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