If the government imposes duty on imported goods to promote local production, what will be the effect on an importer?

Correct answer: Import cost may increase

The governing concept is the political environment of business, because government trade policy directly affects business decisions and costs. An import duty is a tax or charge imposed on goods brought from another country. If the importer previously paid 100 units for a product and the government adds a duty of 10 units, the immediate landed cost becomes at least 110 units, before considering other charges. The importer may therefore face a higher purchase cost, reduce the order, raise the selling price, or accept a lower margin. Option C is correct because it states the direct likely effect. Option A reverses the effect, while B and D are not automatic consequences of an import duty.