Answer to Question #261286 in Macroeconomics for Juice

Question

Which of the following statements regarding tariffs is wrong?

- A tariff reduces the gains from trade

- A tariff makes domestic producers worse off

- A tariff is a tax on imports

- A tariff moves a market closer to the equilibrium than would exist without trade

Answer 1

A tariff is a tax or duty imposed by the country on imports. 

One of the objective to set tariff on import is to protect domestic producer from the international competition. So the tariff is better off for domestic supplier or producer. So statement B is false. So option B is correct.

Tariff reduce the gain of trade. It has some deadweight loss or cost of tariff. 

When domestic price is higher than the world price then domestic country import goods from world, The tariff moves a market closer to the equilibrium than would exist without trade.