Which of the following statement best describes the effect of a tariff?

[A] It decreases the quantity of a good bought in a country and decreases tax revenue.

[B] It decreases the domestic price of a good and has no effect on total product surplus.

[C] It increases the quantity of a good bought in a country and increases tax revenue

[D] It increases the domestic price of a good and decreases availability of a product.

Answer: D

Notes:

Customs duties on merchandise imports are called tariffs. Tariffs give a price advantage to locally-produced goods over similar goods which are imported, and they raise revenues for governments.
When a tariff is imposed the volume of imports shrinks. The cost to the economy is a loss of consumer surplus, as consumers have to pay higher prices to get products that they previously imported at lower prices.

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