📚 Learning Guide
Effects of Tariffs on Markets
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How do tariffs on imported goods typically affect economic efficiency in international trade?

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Choose the Best Answer

A

Tariffs increase economic efficiency by promoting domestic production.

B

Tariffs decrease economic efficiency by raising prices and reducing consumer choice.

C

Tariffs have no effect on economic efficiency.

D

Tariffs increase economic efficiency by enhancing competition.

Understanding the Answer

Let's break down why this is correct

Answer

Tariffs are taxes that a government places on imported goods, and they can affect economic efficiency by raising the prices of those goods. When tariffs are applied, domestic producers may benefit because their products become relatively cheaper compared to the imported ones, which can lead to increased production and jobs in the local market. However, this can also lead to higher prices for consumers, as they have to pay more for imported goods or may have fewer choices available. For example, if a country imposes a tariff on foreign cars, people might have to pay more for cars overall, even if they prefer the imported ones. This situation can lead to a less efficient market because resources are not being used in the most productive way, and overall economic welfare can decrease.

Detailed Explanation

Tariffs make imported goods more expensive. Other options are incorrect because Some think tariffs help local businesses by making imports costly; It's a common belief that tariffs don't change anything.

Key Concepts

International Trade
Economic Efficiency
Topic

Effects of Tariffs on Markets

Difficulty

medium level question

Cognitive Level

understand

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