Which of the following is a risk associated with importing goods?

• A. Local demand for imported goods may decrease.
• B. Exporters may face tariffs in foreign markets.
• C. Exchange rate fluctuations can increase the cost of imported goods.
• D. Domestic producers may gain a competitive advantage.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the context of the problem, which is about risks associated with importing goods. Importing involves buying goods from foreign countries and bringing them into the domestic market.
2. Step 2: Identify the nature of each option given. For example, 'Local demand for imported goods may decrease' is about consumer preferences, not a direct risk of importing itself.
3. Step 3: Recognize that 'Exporters may face tariffs in foreign markets' relates to exporters, not importers, so it is not a risk for importing goods.
4. Step 4: Analyze the option 'Exchange rate fluctuations can increase the cost of imported goods.' Exchange rates affect the price importers pay when converting domestic currency to foreign currency, which is a direct financial risk for importers.
5. Step 5: Note that 'Domestic producers may gain a competitive advantage' is a potential effect on producers, not a risk for importers. Therefore, the key risk for importers is the uncertainty and potential increase in costs due to exchange rate fluctuations.