What is the primary function of protective tariffs?

• A. To shield domestic industries from foreign competition by increasing the price of imported goods
• B. To reduce the overall level of consumption in the economy
• C. To generate government revenue without affecting domestic markets
• D. To encourage exports by subsidizing domestic producers

Answer: (A)

Verified step by step guidance

1. Understand the concept of a tariff: A tariff is a tax imposed on imported goods, which raises their price in the domestic market.
2. Recognize the effect of increasing the price of imported goods: When tariffs increase the cost of imports, these goods become less competitive compared to domestically produced goods.
3. Identify the primary goal of protective tariffs: They are designed to protect domestic industries by making foreign products more expensive, thereby encouraging consumers to buy domestic products.
4. Distinguish protective tariffs from other types of tariffs: Unlike tariffs aimed solely at generating government revenue or reducing consumption, protective tariffs specifically aim to shield domestic producers from foreign competition.
5. Summarize the primary function: Protective tariffs increase the price of imports to protect domestic industries, which aligns with the correct answer choice.