A tariff ______ the amount of output produced by domestic firms and ______ the amount of goods bought by domestic consumers.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases

Question

Quizplus · Accepted Answer

A tariff increases the price of imported goods, making them less competitive with domestic goods. As a result, domestic firms may increase their supply since they face less competition from imports. On the other hand, domestic consumers may reduce their demand for the higher-priced goods, leading to a decrease in the amount of goods bought. Therefore, a tariff increases the amount of output produced by domestic firms and decreases the amount of goods bought by domestic consumers.

A Tariff ______ the Amount of Output Produced by Domestic