Question

Which of the following best explains why a country might impose tariffs on imported goods?

• A. To increase the volume of imports and promote free trade
• B. To protect domestic industries from foreign competition
• C. To reduce the country’s export revenue
• D. To eliminate the trade deficit completely

Hint:

Remember: Tariffs are a trade barrier used to shield domestic industries from cheaper foreign goods, but they may lead to higher prices for consumers.

Answer 1

The Correct Option is B

Explanation: Tariffs are taxes imposed by a government on imported goods. They increase the price of imported products, making them less competitive compared to domestically produced goods. This protects domestic industries by encouraging consumers to buy local products, thereby supporting local employment and production.
- Option (1) is incorrect because tariffs typically reduce the volume of imports by making them more expensive, rather than promoting free trade.
- Option (3) is incorrect because tariffs are not designed to reduce export revenue; they primarily affect imports.
- Option (4) is incorrect because tariffs may reduce a trade deficit but are not guaranteed to eliminate it completely, as trade balances depend on multiple factors.
Answer: The correct answer is option (2): To protect domestic industries from foreign competition.