A tariff is a tax imposed on imported goods, not on exported goods (A). Tariffs generally result in higher prices for domestic consumers, as imported goods become more expensive (B). Tariffs can actually discourage worldwide specialization and trade, as countries may react by imposing their own tariffs, leading to reduced international trade (D).

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A Tariff

Question 37

Multiple Choice

A tariff

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

Correct Answer: