International Economics
16th Edition
ISBN: 9781305887633
Author: Robert Carbaugh
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Concept explainers
Question
Chapter 4, Problem 1SQ
To determine
Explain the specific tariff, ad valorem tariff, and compound tariff.
Expert Solution & Answer
Explanation of Solution
Specific tariff: The amount of money paid per physical unit of imported product is known as the specific tariff. This tax considers goods such as wheat, rice, fertilizers, cement, sugar, cloth, and so on.
Advantage:
- 1) Easy to understand.
- 2) Effective in reducing
demand . - 3) Equally increases the price of goods and makes a bigger effect in the reduction of overall demand.
Disadvantage:
- 1) Tax is more regressive, that is low income and higher income groups have the same tax burden.
- 2) Decline in the level of protection in the inflation period.
Ad valorem tax: The fixed percentage of money levied as duty on the commodity that goes under trade based on its values is known as the Ad valorem tax.
Advantage:
- 1) Easy to implement
- 2) Tariff increases with the same rate due to the proportionality.
- 3) Increase with increasing inflation will reduce the demand of consumer in the inflation situation.
Disadvantage:
- 1) Incentive to use a false invoice.
Compound tariff: A blend of specific and ad valorem tax is known as the compound tax.
Want to see more full solutions like this?
Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!
Students have asked these similar questions
Why would an importing country use a tariff rather than a quota?
What are the benefits and costs of import tariffs?
Carefully explain how the imposition of a tariff is different for a large country (that can affect the world price) than a small country. Show your work graphically and explain in words.
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Similar questions
- You have just been put in charge of trade policy for Malawi. Coffee is a recent crop that is growing well and the Malawian export market is developing. As such,Malawi coffee is aninfant industry.Malawi coffee producers come to you and ask for tariff protection from cheap Tanzanian coffee. What sorts of policies will you enact? Explain.arrow_forwardWhich of the following is not included in the objectives of tariffs? To promote indigenous research and development To protect domestic industries from foreign competition None of the above To guard against dumpingarrow_forwardI don’t understand how to add a tariffarrow_forward
- Describe the structure of the tariff in the industrial countries?arrow_forwardUnder what conditions may a tariff actually make a country better off? Show it graphically and explain in words.arrow_forwardAn import Tariff does: Increase domestic consumption Decrease domestic production Decrease domestic prices Increase government revenuearrow_forward
- Identify and explain who will make and lose money from this tariff. Identify the people and organizations that will benefit from the tariff. Identify the people and organizations that will suffer because of the tariff. How will the tariff impact your company?arrow_forwardwhy is the implementation of rice tariffication law in the Philippines not good?arrow_forwardIdentify and explain who will make and lose money from this tariff.arrow_forward
- A tariff on imported widgets would __________ domestic widget consumers, __________ domestic widget producers, and __________ foreign widget producers.arrow_forwardDescribe as many types of tariffs and non- tariff barriers (NTBs) that are imposed on products and the reasons for their use. Examples are useful.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
- Economics Today and Tomorrow, Student EditionEconomicsISBN:9780078747663Author:McGraw-HillPublisher:Glencoe/McGraw-Hill School Pub CoEconomics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Economics Today and Tomorrow, Student Edition
Economics
ISBN:9780078747663
Author:McGraw-Hill
Publisher:Glencoe/McGraw-Hill School Pub Co
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning