Tariffs make imports more expensive, which can make domestic industries protected by the tariffs less competitive than foreign producers. As a result, the protected industries may not feel the pressure to innovate or become more efficient, leading to their contraction over time.

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Tariffs Lead to

Question 86

Multiple Choice

Tariffs lead to

A) the contraction of relatively efficient industries.
B) an over allocation of resources to relatively efficient industries.
C) an increase in the foreign demand for domestically produced goods.
D) an under allocation of resources to relatively inefficient industries.

Correct Answer: