A tariff is a tax imposed on imported goods, making them more expensive for domestic consumers and providing an advantage to domestic producers. It does not promote worldwide specialization or affect prices paid by domestic consumers. A tax imposed on exported goods is known as an export tax.

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A Tariff

Question 34

Multiple Choice

A tariff

A) encourages worldwide specialization according to the principle of comparative advantage.
B) is a tax imposed on exported goods.
C) is a tax imposed on imported goods.
D) has no effect on prices paid by domestic consumers even though it increases the revenue collected by domestic producers.

Correct Answer: