The effect of a tariff
A) is negligible since it applies to firms outside the nation.
B) can lead to economies of scale for firms inside the nation.
C) can lead to a monopoly when domestic firms become the sole suppliers inside the nation.
D) will be more beneficial to large firms than to small firms.

Question

Quizplus · Accepted Answer

A tariff can make foreign goods more expensive, making it harder for foreign firms to compete with domestic firms. This can result in a situation where domestic firms become the only suppliers inside the nation, creating a monopoly. Therefore, option C is the best choice. Option A is incorrect since a tariff applies to foreign firms, not domestic firms. Option B is not necessarily true, as there may be other factors that affect economies of scale. Option D is also incorrect since the effect of a tariff can depend on the size and competitiveness of the firms involved.

The Effect of a Tariff