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13 February, 04:10

U. S. firms can produce and sell electric fans for $25. The United States can also import electric fans from China at $19 each and from Canada at $20 each. Electric fans made in the United States, China, and Canada are identical. Currently, the United States imposes a 30% tariff on imported electric fans. which country will the United States import fans?

A) China B) Canada C) both China and Canada D) neither China nor Canada

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  1. 13 February, 07:26
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    Answer: Option (A) is correct.

    Explanation:

    U. S firms sell electric fans = $25 each

    Before imposition of 30% tariff,

    Imported price of electric fans from China = $19 each

    Imported price of electric fans from Canada = $20 each

    All the three countries are producing identical electric fans.

    After imposition of 30% tariff,

    Imported price of electric fans from China = $24.7 each (tariff of $5.7)

    Imported price of electric fans from Canada = $26 each (tariff of $6)

    ∴ U. S will import fans from China because China has the lower price of electric fans as compared to United States and Canada after imposition of 30% tariff.
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