If there is something extra bad about local consumption of a product, then a tariff can be good for the country because:
A)the tariff makes all residents richer.
B)the tariff brings down the domestic price of the product.
C)the tariff leads to higher domestic price for the product.
D)the tariff revenue is invested in the production of substitute products.

Question

Quizplus · Accepted Answer

If there is something extra bad about local consumption of a product, such as negative externalities or harm to the environment, then a tariff can help to discourage domestic consumption and lead to a higher domestic price for the product. This, in turn, incentivizes consumers to find alternatives or reduce their consumption, ultimately leading to a positive impact on the environment and public health. The revenue generated from the tariff can also be used to invest in alternative and sustainable production methods. Therefore, choice C is the correct answer as it states that the tariff leads to a higher domestic price for the product.

If There Is Something Extra Bad About Local Consumption of a Product