Raising an existing tariff on grapes from Argentina will:

• A. increase the demand for imported grapes
• B. increase the domestic price of imported grapes
• C. reduce government revenue from tariffs
• D. decrease the quantity of domestic grapes supplied

Answer: (B)

Verified step by step guidance

1. Understand the role of a tariff: A tariff is a tax imposed on imported goods, which raises the cost of those goods for consumers.
2. Analyze the effect of raising the tariff on imported grapes: Increasing the tariff makes imported grapes more expensive, which typically decreases the quantity demanded of imported grapes rather than increasing it.
3. Consider the impact on the domestic price of imported grapes: Since the tariff raises the cost of imports, the domestic price of imported grapes will increase to reflect the higher cost.
4. Evaluate government revenue from tariffs: Government revenue depends on the tariff rate and the quantity of imports. Raising the tariff might reduce the quantity imported, which could reduce total tariff revenue if the decrease in quantity is large enough.
5. Assess the effect on domestic grape suppliers: Higher prices for imported grapes can make domestic grapes relatively cheaper, potentially increasing the quantity of domestic grapes supplied rather than decreasing it.