Tariff Effects on Domestic Market Quantities

Steps:

• Tariff shifts import supply up from Sw to S + t, raising domestic price from Pw to Pw + t.
• Higher price reduces quantity demanded along domestic demand curve from Q1 to Q2.
• Higher price increases quantity supplied along domestic supply curve from Q4 to Q3 (Q4 < Q3).
• Net imports fall as the gap between consumption and production narrows from (Q1 - Q4) to (Q2 - Q3).

Why C is correct:

• Domestic supply increases from smaller Q4 to larger Q3, but C reverses this to from Q3 to Q4, violating the law of supply (higher price increases quantity supplied).

Why the others are wrong:

• A is correct: Consumption falls along demand curve from Q1 (at Pw) to Q2 (at Pw + t).
• B is correct: Initial imports span to Q1, final imports reduced to span Q3 per diagram segments.
• D is correct: Import quantity falls from initial level tied to Q2 segment to final Q4 segment.

Final answer: C