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India imposes a 15% tariff on imported automobiles to protect its domestic manufacturers. Which of the following is a likely short-term consequence of this tariff on Indian consumers?

A tariff on automobiles increases the landed cost of imports by 15%, making imported vehicles more expensive in the Indian market. This typically results in higher prices for the automobile category overall, though domestic manufacturers may also raise prices due to reduced import competition.

  1. AAutomobile prices fall as foreign competition increases in the market
  2. BDomestically produced automobiles become relatively more expensive compared to imports
  3. CImported automobiles become more expensive, leading to higher prices for this category in the Indian marketCorrect
  4. DConsumer choice expands as tariff revenue is used to subsidise new brands

Explanation

A tariff increases the cost of imported goods by the tariff amount, making them more expensive in the domestic market. This typically leads to higher overall prices for the tariffed product category. Option 0 is incorrect because tariffs reduce, not increase, foreign competition. Option 1 reverses the effect. Option 3 confuses tariff purpose with consumer benefits.

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