Which statement best describes a tariff?

• A. A tariff is a subsidy to domestic producers.
• B. A tariff is a tax on exports.
• C. A tariff is a tax on imports that raises domestic prices and protects domestic producers.
• D. A tariff has no effect on consumer welfare.

Answer: (C)

Tariffs are taxes placed on goods imported into a country. By adding a cost to imports, they raise the price of foreign-made products relative to domestically produced ones, which helps protect local producers and jobs by reducing competition from abroad. That description—tax on imports that raises domestic prices and shields domestic producers—is why it’s the best choice. It isn’t a subsidy paid to producers, it isn’t a tax on exports, and tariffs do affect consumer welfare by making some goods more expensive and potentially reducing choices.