Suppose That the Free-Trade Price of a Ton of Steel

Multiple Choice

Suppose that the free-trade price of a ton of steel is €500. (Note: € is the symbol for the euro, a common currency used in 19 European countries, including Finland.) Finland, a small country, imposes a €60 per-ton specific tariff on imported steel. With the tariff, Finland produces 300,000 tons of steel and consumes 600,000 tons of steel. What will happen to the Finnish price of steel if Finnish demand increases and the tariff remains at €60-per-ton?

A) It will not change.
B) It will increase.
C) It will decrease.
D) It will first increase, then decrease.