alleryStart learning →What is the purpose of a protective tariff?
ATo raise revenue for the government that imposes it
BTo make imports less attractive to buyers than local goods
CTo compensate exporters for the cost of long shipments
DTo set the exchange rate between two trading currencies
Answer & Solution
Correct answer: B. To make imports less attractive to buyers than local goods
1. Protective tariffs are one named category of tariff.
2. They make imported products less attractive to buyers than domestic products.
3. A tariff that raises the price of an imported item by a large margin can cut its market share sharply.
4. Exchange rates float on supply and demand and are not set by tariffs.
5. Exporters are not compensated by a tariff, since a tariff is charged on imports.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 3 "Competing in the Global Marketplace", section 3.3 Barriers to Trade_
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