Question

Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers." This statement:_________.

A. contains one error; the trade restraints do not increase the scarcity of foreign-produced goods.
B. contains one error; domestic producers gain at the expense of foreign producers rather than domestic consumers.
C. contains two errors; trade restraints do not increase the domestic scarcity of product and neither do they harm domestic consumers.
D. is essentially correct.

Answer 1

Answer: (B).

The statement contains one error; domestic producers gain at the expense of foreign producers rather than domestic consumers.

Step-by-step explanation:

Tariffs are forms of trade restrictions that limits the importation of goods into a country. Placing tariffs on imported goods make them more expensive and less appealing to consumers. As such, consumers will prefer to buy from domestic producers.

Government places trade restrictions on goods to protect domestic producers of such goods from foreign competition.

While such government policies benefit domestic producers, they harm foreign producers who export into the country, as the tariffs and trade restrictions will make their products unattractive to consumers due to the high prices.