"Tariffs and Other Trade Restrictions Increase the Domestic Scarcity of Products

question 6

Multiple Choice

"Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers." This statement:

• A) contains one error; the trade restraints do not increase the scarcity of foreign-produced goods.
• B) contains one error; domestic producers gain at the expense of foreign producers rather than domestic consumers.
• C) contains two errors; trade restraints do not increase the domestic scarcity of product and neither do they harm domestic consumers.
• D) is essentially correct.

---

Definitions:

Profit Maximization

The approach a corporation takes to figure out the price and production level that brings in the most profit.

Profit Sharing

A company policy wherein employees receive a share of the profits of the business, which serves as a motivation and reward for their performance.

Cartel Output

The total production level agreed upon by members of a cartel, aimed at maximizing their collective profits by controlling supply.

Demand Schedule

A table or graph displaying the quantity of a good or service that consumers are willing and able to purchase at various price points within a given time frame.