Question

1. explain why a tariff might make domestic producers more competitive without improving their actual productivity.

Explanation:

A tariff is a tax on imported goods. When a tariff is imposed, the price of imported goods increases. This makes imported goods relatively more expensive compared to domestic goods. Domestic producers can then sell their products at a price that is more competitive (closer to or even lower than the now - higher price of imported goods) without having to improve their own productivity (like improving technology, efficiency in production processes, etc.). For example, if a country imposes a tariff on imported shoes, the price of imported shoes will rise. Domestic shoe producers can continue to produce shoes at their current level of productivity but can now compete better in the market because the price advantage that imported shoes once had (due to lower production costs or other factors) is reduced or eliminated by the tariff - induced price increase of imports.

Answer:

A tariff increases the price of imported goods. This raises the relative price of imports, making domestic goods more price - competitive in the market. Domestic producers can compete better (e.g., gain market share, charge prices closer to import - related prices) without improving their actual productivity (e.g., production efficiency, technology) because the tariff - driven price hike of imports reduces the price advantage imports previously had over domestic products.