A tariff causes domestic firms to ________ and consumers to?
Correct answer: A. overproduce, under consume
- A. overproduce, under consume
- B. Overproduce, overconsume
- C. underproduce, under consume
- D. underproduce, overconsume
Explanation
A tariff raises the domestic price above the world price, so domestic producers expand output while consumers reduce consumption. Hence it causes overproduction and underconsumption.
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