The main redistribution effect of a tariff is the transfer of income from
A) domestic producers to domestic buyers.
B) domestic buyers to domestic producers.
C) domestic producers to domestic government.
D) domestic government to domestic consumers.
E) foreign producers to domestic consumers.

Question

Quizplus · Accepted Answer

A tariff is a tax on imported goods. When a tariff is imposed, the price of the foreign goods increases, making them less attractive to domestic buyers. Domestic buyers then switch to buying from domestic producers, who are able to charge higher prices due to the reduced competition. This results in a transfer of income from domestic buyers to domestic producers.

The Main Redistribution Effect of a Tariff Is the Transfer