Specific tariffs are collected as
Options:
| a. fixed amount of money per unit traded b. a percentage of the price of the product c. a percentage of the quantity of imports d. all of the above |
The Correct Answer Is:
- a. fixed amount of money per unit traded
The correct answer is option “a. fixed amount of money per unit traded.” Specific tariffs are indeed collected as a fixed amount of money per unit traded. Let’s delve into a detailed explanation of why this is the case and why the other options are not correct:
Correct Answer (a): a. Fixed amount of money per unit traded
Explanation:
A specific tariff is a type of trade barrier or tax imposed by a government on imported goods. The unique characteristic of specific tariffs is that they are levied as a fixed amount of money per unit traded, such as per kilogram, per unit, or per gallon, rather than being based on a percentage of the price of the product or the quantity of imports.
This fixed amount is predetermined by the government and does not change with fluctuations in the product’s price or the quantity of imports. Specific tariffs are often used to generate revenue for the government or to protect domestic industries by making imported goods more expensive.
For example, if a country imposes a specific tariff of $5 per kilogram on imported coffee beans, regardless of whether the price of coffee beans is $10 per kilogram or $20 per kilogram, the tariff amount remains $5 per kilogram.
This approach ensures that the government collects a consistent amount of revenue from each unit of the imported product, making it different from ad valorem tariffs, which are calculated as a percentage of the product’s value.
Now, let’s discuss why the other options are not correct:
b. A percentage of the price of the product:
Option b suggests that specific tariffs are collected as a percentage of the price of the product, which is not accurate. Specific tariffs are, by definition, not based on the price of the imported product.
They are a fixed monetary amount per unit, as explained above. This fixed amount remains constant regardless of whether the product’s price increases or decreases. The advantage of specific tariffs is that they provide a stable source of government revenue, but they do not respond to changes in product prices.
c. A percentage of the quantity of imports:
Option c implies that specific tariffs are collected as a percentage of the quantity of imports. However, this is not how specific tariffs operate.
While it is true that tariffs can be calculated based on the quantity of imports in some cases, such as in the case of ad valorem tariffs (which are percentage-based), specific tariffs are specifically based on a fixed monetary amount per unit traded, as stated in option “a.”
This means that the tariff amount remains the same, regardless of the quantity of imports. Therefore, option “c” is not correct for describing specific tariffs.
In summary, specific tariffs are collected as a fixed amount of money per unit traded. This approach distinguishes specific tariffs from ad valorem tariffs, which are calculated as a percentage of the product’s value.
The fixed nature of specific tariffs makes them less responsive to changes in product prices or import quantities, and they are primarily used to generate consistent revenue for the government or protect domestic industries from foreign competition. Therefore, option “a” is the correct and accurate description of how specific tariffs are collected.
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