Canada's forestry industry (composed mainly of those involved in the lumber industry) directly employs about 370,000 workers and indirectly employs an additional 510,000 people in support services. Forestry products account for nearly 3 percent of Canada's gross domestic product (GDP) and 14.1 percent of its exports. Lobbyists for the U.S. lumber and timber producers recently filed a complaint with the U.S. International Trade Commission (ITC) and the U.S. Department of Commerce (DOC) alleging that the Canadian government provided a subsidy to its lumber producers and caused harm to U.S. lumber and timber producers. As a result of these concerns, one U.S. lobbyist proposed the imposition of a 15 percent excise tariff on all Canadian forestry products.

Determine the likely impact of the proposed 15 percent excise tariff on the equilibrium price and quantity of lumber exchanged in the U.S.

Equilibrium price of lumber exchanged in the U.S. will (Click to select)

decrease

not change.

increase.

Equilibrium quantity of lumber exchanged in the U.S. will (Click to select)

not change.

decrease.

increase.

True or false: Domestic consumers benefit from the proposed tariff.

multiple choice 3

• True
• False

True or false: Domestic producers benefit from the proposed tariff.

multiple choice 4

• False
• True