Question

When a small country levies a tariff on imports, this causes the domestic price of the imported good to ________, which is ________ to the foreign exporting country and ________ to the importing country.

A) Rise; harmful; irrelevant

B) Fall; beneficial; harmful

C) Rise; beneficial; irrelevant

D) Rise; irrelevant; harmful

E) Rise; irrelevant; beneficial

Answer 1

The tariffs are imposed in a country on imported goods to increase the price of such goods with the idea of protecting domestic firms from global competitors. This also helps in promoting domestic products at cheaper prices than global products.

Thus, when a small country levies a tariff on imports, this causes the domestic price of the imported goods to rise, which is irrelevant to the foreign exporting country and beneficial to the importing country. Note that this is irrelevant to the foreign exporting country as tariff simply increase the prices of these goods but are still sold in the market at a higher price.

Thus, Option D is the correct answer.