Understanding Tariffs

What is a tariff?

• A type of income tax

• A subsidy given to exporters

• A tax imposed on imported goods

• A fine for non-compliance with trade laws

The primary purpose of a tariff is to:

• Promote exports

• Increase foreign competition

• Raise government revenue and protect domestic industries

• Encourage foreign investment

A specific tariff is:

• A fixed amount charged per unit of imported good

• A percentage of the value of the imported good

• A tax on domestic goods

• A variable tax rate on luxury goods

An ad valorem tariff is:

• A tax on services only

• A fixed charge on each good

• A tax based on the value of the imported good

• A quota on exports

Which of the following is NOT an effect of tariffs?

• Increase in domestic production

• Decrease in imports

• Fall in government revenue

• Increase in prices of imported goods

Which group is most likely to benefit from tariffs?

• Domestic consumers

• Foreign producers

• Domestic producers

• International traders

Tariffs may lead to:

• Decrease in cost of living

• Higher efficiency due to competition

• Trade wars between countries

• Increased foreign direct investment

A country imposes tariffs to:

• Decrease domestic employment

• Improve the balance of payments

• Discourage domestic production

• Increase foreign dependency

Which of the following best describes a protective tariff?

• It is imposed to raise revenue for the government

• It protects domestic industries from foreign competition

• It is used to control inflation

• It regulates exports

Tariffs can result in:

• Lower prices for consumers

• Greater variety of imported goods

• Inefficiency in domestic industries

• Enhanced consumer surplus