AP Micro & MacroInternational Trade & Finance
Tariff
A tariff is a tax on imported goods that raises their price and protects domestic producers from foreign competition.
It raises government revenue and helps domestic producers, but raises prices and reduces quantity for consumers, creating deadweight loss. It reduces imports and the overall gains from trade. Tariffs are a common form of trade protection.
Formula / Example
Domestic price with tariff = world price + tariff per unit.
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