The correct answer is “a. Ad valorem tariff.” To understand why this is the case, let’s explore the concept of tariffs and the different types of tariffs, along with detailed explanations for each of the given options.

Ad Valorem Tariff:

An ad valorem tariff is a type of tax imposed on imported goods based on a percentage of the value of those goods. In the case mentioned, a tax of 15 percent per imported item is an example of an ad valorem tariff. The key characteristic of ad valorem tariffs is that they are calculated as a percentage of the import’s assessed value.

In this way, the tariff rate remains proportional to the price or value of the imported product. It provides a straightforward and consistent method of taxation, with the tax amount increasing as the value of the imported item increases.

Ad valorem tariffs are commonly used in international trade to generate government revenue, protect domestic industries, or achieve various policy objectives. In this scenario, the 15 percent tax is directly tied to the value of the imported item, making it a clear example of an ad valorem tariff.

Specific Tariff:

A specific tariff is a type of tariff that levies a fixed amount of tax per physical unit of the imported item. This is in contrast to ad valorem tariffs, which are calculated as a percentage of the item’s value. In the case of a specific tariff, the tax is imposed based on specific characteristics like quantity, weight, volume, or other non-monetary measures.

For example, if a country imposes a tax of $5 on each imported bicycle, regardless of the bicycle’s actual value, it would be a specific tariff. Since the given scenario mentions a tax of 15 percent, it does not align with the definition of a specific tariff.

Effective Tariff:

An effective tariff is a concept that takes into account both the applied tariff (the actual tariff rate imposed) and other trade-related factors, such as subsidies, taxes, or regulations, that can affect the final cost of imported goods. It is essentially the overall impact of all these factors on the effective cost of an imported product.

While it is an important concept in trade economics, it is not a specific type of tariff. Effective tariffs provide a more comprehensive understanding of the real costs of trade, but they are not the same as the type of tariff being imposed.

Compound Tariff:

A compound tariff combines elements of both ad valorem and specific tariffs. In a compound tariff, the imported item is subject to a fixed amount of tax plus an additional tax calculated as a percentage of the item’s value.

For instance, a compound tariff might include a $5 tax per bicycle plus 10 percent of the bicycle’s value. In the given scenario, there is no indication of a combination of fixed and percentage-based taxes; it only mentions a single tax rate of 15 percent. Therefore, it does not fit the definition of a compound tariff.

In conclusion, the tax of 15 percent per imported item is correctly classified as an “ad valorem tariff” because it is calculated as a percentage of the value of the imported goods.

The other options, specific tariff, effective tariff, and compound tariff, do not apply in this context, as they represent different types of tariffs or broader trade-related concepts that do not align with the scenario described. Ad valorem tariffs are commonly used in international trade and play a significant role in trade policy and taxation strategies.