Question

The United States government puts high tariffs on a certain product that is imported from other countries. What effect does this have in the United States?

A. U.S. producers have to compete more with the imported product.
B. High tariffs create a greater demand for the imported product.
C. The product costs more in the U.S. that on the world market.
D. The product costs less in the U.S. that on the world market.

Answer 1

The correct answer is C. The product costs more in the U.S. that on the world market.

When the government establishes high tariff rates for a product, the first impact is that the cost of acquiring that product in the domestic market increases.

The government can establish this high tariff for different reasons: to collect more tax money, to protect the local industry from foreign competition, to discourage the use or consumption of that product, etc. In all cases the same result is obtained: the price of the product becomes more expensive than in the rest of the free markets or with lower import tariff.

Answer 2

The effect that high tariffs have on the United States is that the product costs more in the U.S. that on the world market.