if country A imposes a tariff on basketballs, and company F was having trouble selling their basketballs at market price because their costs are higher than competitors. company F sells their basketballs for a premium to market price. does the tariff help them or hurt them? i thought that it wouldnt necessarily help them because the GOVERNMENT collects the tariff revenue. however, the book is telling me it helps the firm because it raises the price of basketballs and helps them sell. but doesnt the Gov collect the $?
While its true that the government is the one directly benefitting from the tariff, your basketball company will benefit because the price of basketballs produced by foreign competitors will rise. The foreign basketball companies will have to raise prices in order to pay the tariff, which will allow Company F to raise its prices as well. However, since Company F does not pay the tariff, the raise in price will go straight to its bottom line.
While the gov’t does collect the tariff, the tariff raises the prices of the imported basketballs. Think of it like a tax only on imported basketballs. The higher price of the imported basketballs makes the domestic producers relatively more competitive. Company F would be helped by this. The consumers would lose. And some idiot senator would pat himself on the back for not letting a “basketball production gap” develop. T/G
haha thanks guys that makes sense
government and domestic producers benefit from tariffs at the expense of domestic consumers and foreign producers
domestic consumers always get screwed…remember that that’s us…you and me…
Government never produces anything…only takes. So when they get in the game the consumer bears the cost…always.