A tariff______________?
Correct answer: B. Reduces the volume of trade
- A. Increase the volume of trade
- B. Reduces the volume of trade
- C. Has no effect on volume of trade?
- D. A and C of above
Explanation
A tariff raises the domestic price of imported goods, reducing the quantity demanded of imports and therefore the volume of international trade. Its protective effect is the usual reason governments impose it.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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