Question

Suppose the United States imposes higher steel tariffs. How does the change in steel import restrictions affect automobile manufacturers who use steel as an​ input?
A. The automobile industry will experience job loss as manufacturers are more likely to relocate to other countries.
B. The tariff change will prompt automobile manufacturers to lower the price of vehicles.
C. The cost of producing automobiles will decrease.
D. Automobile manufacturers will become more profitable as the price of steel falls.

Answer 1

Answer:

A. The automobile industry will experience job loss as manufacturers are more likely to relocate to other countries.

Explanation:

As automobile manufacturers use steel as an input, any high steel tariff raises their cost of producing automobiles in the U.S. They couldn't produce the same amount of automobiles for the same cost of producing and they couldn't change steel as an input for production. Looking to keep or low their cost of producing automobiles, manufacturers are likely to relocate to other countries, firing employees in the U.S. automobile industry.

Answer 2

Answer:

A. The automobile industry will experience job loss as manufacturers are more likely to relocate to other countries.

Explanation:

When the price of an input increases, the cost of production of a manufacture increases, making the product less competitive as it becomes expensive. Thus, the company will outline a strategy to maintain its competitiveness. This may involve lowering labor costs, increasing unemployment, or shifting your production matrix to a place where there are no tariff barriers to inputs.