IB International Economics Higher Level (HL) Practice Exam 2025 - Free IB Economics HL Practice Questions and Study Guide

A tariff is primarily imposed to restrict import flows into the country. When a government imposes a tariff, it places a tax on imported goods. This increases the cost of these goods for consumers and businesses, making them less attractive compared to domestic products. As a result, tariffs generally lead to a decrease in the quantity of imports, aiming to protect local industries from foreign competition. This protectionist measure allows domestic producers to gain a more favorable position in the market, potentially increasing their output and maintaining employment levels within the country.

The other choices highlight misconceptions about the purpose of tariffs. For instance, tariffs do not increase imports; instead, they reduce them by making imported goods more expensive. Enhancing price competition suggests that tariffs would lead to lower prices for consumers, which is contrary to their typical impact of raising prices on imported goods. Finally, while tariffs may have an indirect effect on domestic production, their primary objective is to limit imports rather than explicitly decrease domestic production.