Identify the missing step in the following chain:
The government puts a tariff on imported cars → ________ → Fewer imported cars are bought → Car makers in India are protected from foreign competition.
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → Imported cars become more expensive.
A tariff is a tax on imported goods. It makes them more expensive and so discourages their use. Fewer imports then shield home firms from foreign competition.
Option (1) Imported cars become more expensive. — Correct. This is the step between the tariff and lower imports.
Option (2) The number of cars that can be imported is fixed. — Incorrect. Fixing the quantity is a quota, not a tariff.
Option (3) Car makers in India get a licence to expand. — Incorrect. Licensing is an industrial control. It does not follow from a tariff.
Option (4) Imported cars become cheaper to buy. — Incorrect. A tax makes imports dearer, not cheaper.
NCERT (2026-27): “2.5 Trade Policy: Import Substitution … In this policy the government protected the domestic industries from foreign competition. Protection from imports took two forms: tariffs and quotas. Tariffs are a tax on imported goods; they make imported goods more expensive and discourage their use. Quotas specify the quantity of goods which can be imported. The effect of tariffs and quotas is that they restrict imports and, therefore, protect the domestic firms from foreign competition. …” |