Final answer:
Both increasing standards and imposing tariffs can raise the prices of toys from a small exporter. However, while both can lead to similar price effects, standards are typically preferred for purposes of consumer safety and being a more direct policy measure targeting specific issues.
Step-by-step explanation:
Assuming a perfectly competitive market and a small exporting country, let's analyze the impact of increasing standards on a low-income exporter of toys, and compare this to the impact of tariffs. An increase in standards could potentially increase production costs for the exporter, which in turn would shift the supply curve of toys to the left. This shift indicates a decrease in the quantity supplied at any given price, leading to higher prices for toys and reduced exports.
Tariffs also result in increased prices for imported goods by adding an extra cost. Given that both standards and tariffs increase the cost, the direct effect on the price of toys can be similar, with prices rising in both scenarios. However, standards are often preferred over tariffs because standards serve a different purpose and have broader implications. Standards can ensure consumer safety and are a 'first best' policy that directly addresses specific concerns, rather than being a general trade barrier like tariffs, which are a 'second best' policy that can also impact other sectors negatively. Therefore, the correct answer to the question is (b). The effect on prices is different; standards are preferred for consumer safety.