The basic effect of a tariff is to divert resources from their most efficient uses.

Question

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A tariff increases the price of imported goods, making them less competitive and thus diverting resources (such as labor and capital) away from industries that would have otherwise had the lowest production costs and towards less efficient domestic industries. This results in a net loss of economic welfare as resources are not being utilized in their most efficient uses.

The Basic Effect of a Tariff Is to Divert Resources