Introducing a tariff on vitamin z would:

• A. decrease the domestic price of vitamin z and increase the quantity imported
• B. eliminate all domestic production of vitamin z
• C. have no effect on the domestic price or quantity imported
• D. increase the domestic price of vitamin z and reduce the quantity imported

Answer: (D)

Verified step by step guidance

1. Step 1: Understand what a tariff is — a tariff is a tax imposed on imported goods, which raises the cost of those goods for domestic consumers.
2. Step 2: Analyze the effect of a tariff on the domestic price — since the tariff increases the cost of imported vitamin z, importers will pass some or all of this cost onto consumers, causing the domestic price of vitamin z to rise.
3. Step 3: Consider the impact on quantity imported — as the price of imported vitamin z increases due to the tariff, the quantity demanded for imports will decrease because consumers will either buy less or switch to domestic alternatives.
4. Step 4: Evaluate domestic production — with higher domestic prices, domestic producers may find it more profitable to produce vitamin z, potentially increasing domestic production rather than eliminating it.
5. Step 5: Summarize the overall effect — the tariff leads to an increase in the domestic price of vitamin z and a reduction in the quantity imported, which aligns with the correct answer.