Tariffs are taxes on imported goods that make foreign products more expensive, encouraging consumers to buy domestic products. This can reduce efficiency as domestic firms may not face the same competitive pressures to innovate or reduce costs.

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What Do Tariffs Do

Question 13

Multiple Choice

What do tariffs do?

A) reduce the price of foreign goods
B) reduce efficiency because a protective tariff encourages domestic firms to produce products at home
C) create efficient utilization of resources
D) are unambiguously pro-consumer and anti-producer
E) help domestic producers increase their efficiency and resist foreign competition

Correct Answer: