Which of the following best describes the benefits of protective tariffs?

• A. They protect domestic industries from foreign competition.
• B. They always lead to lower prices for consumers.
• C. They eliminate the need for government intervention in markets.
• D. They guarantee increased efficiency in domestic production.

Answer: (A)

Verified step by step guidance

1. Understand what a protective tariff is: it is a tax imposed on imported goods to make them more expensive compared to domestic products.
2. Recognize the primary goal of protective tariffs, which is to shield domestic industries from foreign competition by increasing the cost of imported goods.
3. Analyze the effects of protective tariffs on prices: since tariffs raise import costs, they typically do not lead to lower prices for consumers; instead, prices may increase.
4. Consider the role of government intervention: protective tariffs are themselves a form of government intervention, so they do not eliminate the need for it.
5. Evaluate the impact on efficiency: protective tariffs may protect domestic industries but do not guarantee increased efficiency, as they can reduce competitive pressure to innovate or reduce costs.