Tariffs serve primarily to:

Question

BlackTom AI · Accepted Answer

First, let's lay out the core idea behind tariffs. A tariff is a tax imposed on imported goods, and its primary effect is to raise the cost of those imports in the domestic market. This often makes domestically produced goods relatively more competitive, at least in price, and can also generate government revenue.
Option 1: 'make imports cheaper' is incorrect because tariffs increase, not decrease, the price of imported goods, making them more expensive for consumers.
Option 2: 'encourage foreign trade' is misleading. Tariffs tend to discourage imports by raising their cost, and can provoke retaliatory measures, reducing overall foreign trade activity rather than encouraging it.
Option 3: 'limit the quantity of goods leaving the domestic market' confuses exports with tariffs. Tariffs are taxes on imports, not controls on exports or the quantity leaving the domestic market; they affect the flow of imports, not exports.
Option 4: 'reduce production capacity' is not the primary purpose of tariffs. While tariffs can influence domestic production decisions over time, their direct aim is not to shrink production capacity but to alter trade costs and patterns by making imports more expensive.
Option 5: 'raise prices on imports' correctly identifies the main outcome of imposing a tariff: the price of imported goods rises in the domestic market, influencing consumer choices and market dynamics.

Tariffs serve primarily to:

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