Tariffs Fail Without Domestic Substitutes

Steps:

• Tariffs raise import prices to protect domestic production and generate revenue.
• They benefit X if domestic industries can substitute imports, reducing reliance on Y.
• Without substitute capacity, tariffs increase costs for consumers and firms without boosting local output.
• Evaluate options: unfavorable when protection yields no supply response.

Why B is correct:

• Lacking capacity means no domestic production increase, causing deadweight loss from higher prices without welfare gains (per standard tariff analysis).

Why the others are wrong:

• A: Protects infant industries by shielding them from competition, aiding growth.
• C: Elastic demand amplifies import reduction, aligning with tariff goals to curb foreign reliance.
• D: Counters dumping (sales below cost), restoring fair competition and benefiting X's producers.

Final answer: B