📚 Learning Guide
Effects of Tariffs on Markets
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The imposition of tariffs on imported goods will always lead to an increase in domestic production and a corresponding decrease in consumer surplus in the domestic market.

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A

True

B

False

Understanding the Answer

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Answer

Tariffs are taxes placed on imported goods, making them more expensive. When tariffs are imposed, domestic producers can sell their goods at higher prices because foreign products cost more. This encourages local production since people are likely to buy more from local businesses instead of paying the higher prices for imports. However, consumers face higher prices and have fewer choices, which reduces their surplus, meaning they get less value from their purchases. For example, if a country imposes a tariff on imported shoes, local shoe manufacturers might produce more shoes, but consumers will pay more for them than they would for the cheaper imported options.

Detailed Explanation

Tariffs can help local businesses by making imported goods more expensive. Other options are incorrect because The idea that tariffs always boost local production is a common mistake.

Key Concepts

Tariffs and their impact on domestic markets
Consumer surplus and demand shifts
International trade dynamics
Topic

Effects of Tariffs on Markets

Difficulty

medium level question

Cognitive Level

understand

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