Tariffs Increase Import Costs, Raising Domestic Production Expenses

Steps:

• A tariff is a tax imposed on imported goods, specifically raw materials here.
• This tax raises the price of imported raw materials in the domestic market.
• Domestic firms using these raw materials as inputs face higher costs to produce goods.
• Therefore, overall production costs for these firms increase, making A correct.

Why A is correct:

• By definition, tariffs elevate the effective price of imports, directly increasing input costs for domestic producers reliant on foreign raw materials.

Why the others are wrong:

• B: Tariffs raise prices for consumers, reducing their surplus by limiting affordable choices.
• C: Tariffs generate revenue for the government through collected taxes on imports.
• D: Tariffs increase import prices, leading to decreased demand, not a fall in price or rise in demand.

Final answer: A