A tariff that prohibits imports has only ?
Correct answer: C. consumption effect and protection effect
- A. a revenue effect and redistribution effect
- B. revenue effect and protection effect
- C. consumption effect and protection effect
- D. redistribution effect and consumption effect
Explanation
A prohibitive tariff eliminates imports, so the government collects no tariff revenue. The remaining effects are the protection effect for domestic producers and the consumption effect from reduced consumption at the higher domestic price.
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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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