ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Answer and Explanation: ‘Exports tariffs are used by countries when they believe an export’s price is lower than it should be’ is a true statement. Export tariffs are used when the country wants to limit the sale of domestically produced goods in foreign countries.

Detailed explanation-2: -When a country imposes a tariff, foreign exporters have greater difficulty in selling their products. As their exports decline, they may cut prices in order to keep their sales from falling drastically. Thus, for example, when a tariff of $10.00 is imposed, foreign exporters may cut their price by, say, $6.00.

Detailed explanation-3: -Tariffs hurt consumers because it increases the price of imported goods. Because an importer has to pay a tax in the form of tariffs on the goods that they are importing, they pass this increased cost onto consumers in the form of higher prices.

Detailed explanation-4: -A tariff-induced price rise creates a gap between prices in the importing and exporting countries. This in turn causes supplies (production) to rise in the importing country, while demand (consumption) falls, which is the essence of the “industrial protection” function of tariffs.