When the Government Increases Tariffs

question 21

Multiple Choice

When the government increases tariffs:

• A) production switches from low-cost foreign producers to high-cost domestic producers, causing resources to be wasted.
• B) domestic consumers buy more goods, increasing the gains from trade.
• C) domestic producers produce more output, increasing the gains from trade.
• D) deadweight losses are eliminated because foreign producers sell their product below cost.

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Definitions:

Direct Labor-hour

A measure of the work time involved in producing goods, usually expressed in hours, directly tied to the labor cost of manufacturing.

Accounts Payable

Short-term liabilities representing amounts owed to suppliers or creditors for goods and services received that have not yet been paid for.

Raw Materials

The basic materials and substances that are used in the production of goods, often processed in various ways to create the final product.

Direct Labor Cost

The total expense of employing workers directly involved in manufacturing goods, including wages, benefits, and insurance.