A protective ______ is used in an attempt to protect a country's businesses.

• A. externality
• B. tariff
• C. quota
• D. subsidy

Answer: (B)

Verified step by step guidance

1. Understand the context: The question asks about a protective measure used by countries to shield their domestic businesses from foreign competition.
2. Recall the definitions of the options: An 'externality' is a side effect of an economic activity affecting others, a 'tariff' is a tax on imported goods, a 'quota' is a limit on the quantity of imports, and a 'subsidy' is financial support given to domestic producers.
3. Identify which options are protective measures: Both tariffs and quotas are used to protect domestic industries by restricting imports, while subsidies support domestic producers financially.
4. Focus on the term 'protective' in the question: A 'tariff' specifically refers to a tax imposed on imports to make foreign goods more expensive and less competitive compared to domestic goods.
5. Conclude that the correct answer is 'tariff' because it is a direct protective measure used to shield domestic businesses by increasing the cost of imported goods.