Imposing tariffs results in both wasted resources and lost gains from trade.

Question

Quizplus · Accepted Answer

When tariffs are imposed, it increases the cost of imported goods, reducing their demand in the domestic market. This reduction in demand results in a decrease in supply as well as the number of goods produced domestically. The overall impact on the economy is wasted resources due to the underutilization of available resources and lost gains from trade as both international and domestic trade are negatively impacted.

Imposing Tariffs Results in Both Wasted Resources and Lost Gains