Which of the following best describes why governments enact tariffs on imports?

• A. To protect domestic industries from foreign competition
• B. To increase the efficiency of international markets
• C. To encourage consumers to buy more imported goods
• D. To reduce government revenue

Answer: (A)

Verified step by step guidance

1. Understand the purpose of a tariff: A tariff is a tax imposed by a government on imported goods, which raises the cost of those goods in the domestic market.
2. Analyze the effects of tariffs on domestic industries: By increasing the price of imported goods, tariffs make domestic products relatively cheaper, which can help protect domestic producers from foreign competition.
3. Consider the impact of tariffs on market efficiency: Tariffs generally reduce market efficiency by distorting prices and trade flows, so increasing efficiency is not a typical reason for imposing tariffs.
4. Evaluate the effect of tariffs on consumer behavior: Since tariffs raise prices on imports, they usually discourage consumers from buying more imported goods, contrary to encouraging imports.
5. Assess the government's revenue motive: While tariffs do generate government revenue, this is often a secondary effect rather than the primary reason governments impose tariffs.