📚 Learning Guide
Effects of Tariffs on Markets
hard

How do tariffs, as a form of protectionism, typically affect the welfare of consumers and producers in a domestic market?

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Choose the Best Answer

A

Tariffs increase consumer welfare while decreasing producer welfare.

B

Tariffs decrease consumer welfare while increasing producer welfare.

C

Tariffs have no significant impact on consumer or producer welfare.

D

Tariffs equally increase both consumer and producer welfare.

Understanding the Answer

Let's break down why this is correct

Answer

Tariffs are taxes that a government places on imported goods, making those goods more expensive. When tariffs are applied, domestic producers may benefit because they can sell their products at higher prices without competition from cheaper imports. However, this often hurts consumers, as they have to pay more for goods, and their choices become limited because fewer imports are available. For example, if a country imposes a tariff on foreign cars, local car manufacturers might sell more cars, but consumers will have to pay higher prices than before. Overall, while tariffs can help producers, they usually lead to higher costs and reduced options for consumers in the market.

Detailed Explanation

Tariffs make imported goods more expensive. Other options are incorrect because Some might think tariffs help consumers by protecting jobs; It's a common belief that tariffs don't change anything.

Key Concepts

Tariff
Protectionism
Welfare Effects.
Topic

Effects of Tariffs on Markets

Difficulty

hard level question

Cognitive Level

understand

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