When the world price is below the domestic price, the elimination of a tariff decreases domestic production and provides a benefit because:

Question

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When the world price is lower than the domestic price, it means that it is cheaper to import the good from other countries than producing it domestically. By eliminating the tariff, imports become cheaper, and domestic production decreases, freeing up resources that can be used to produce other goods and services. This way, the economy can shift its resources towards more efficient and profitable industries, ultimately benefiting consumers through lower prices and producers through increased competitiveness. Choice A is incorrect because unemployment is a negative consequence of decreased domestic production. Choice B is too narrow since the benefits extend beyond producers. Choice C is incorrect because decreased production harms producers and workers, although consumers benefit from lower prices.

When the World Price Is Below the Domestic Price, the Elimination