Tariffs provide domestic producers with incentives to be inefficient and operate on the basis of comparative disadvantage.

Question

Quizplus · Accepted Answer

Tariffs give domestic producers protection from foreign competition, but this protection discourages them from improving efficiency and competitiveness. They may rely on the tariff to maintain or increase their prices, rather than focusing on improving their product or lowering costs. This can lead to inefficiencies and a reliance on comparative disadvantage, where a country produces goods it is not as skilled at producing compared to other nations.

Tariffs Provide Domestic Producers with Incentives to Be Inefficient and Operate