For each hypothetical scenario, complete the first column in the following table

Question

For each hypothetical scenario, complete the first column in the following table by indicating whether the tariff described is more likely a protective tariff or a revenue tariff. Tariff Type Scenario A. In response to concerns from business leaders, a legislator has designed a new tariff on raw materials used by many manufacturing firms. The legislator felt the new tariff was necessary based on input from the private sector that new discoveries of natural resources abroad would threaten to put domestic producers of raw materials out of business. To meet this goal, this tariff will charge $2,000 on every crate of the imported goods plus an additional 5% of the total value of the imported goods. B. In an effort to balance next year's budget, a senator has proposed a new tariff. She proposed the new tariff with a goal of raising a total of $100 million. To meet this goal, this tariff will charge $2,000 on every ton that is imported. Protective or Revenue Protective Ad valorem Revenue Compound Ad valorem Compound For each hypothetical scenario, complete the second column in the previous table by determining if the fees charged represe Specific em compound, or specific tariff.

Explanation / Answer

Protective Tariff These tariffs are implemented to protect the domestic industry Revenue Tariff These tariffs are implemented to increase the government revenue and not to protect domestic industries Type of Tariff Ad valorem The Ad valorem tariff is levied based on the fixed percentage of goods imported. Specific Specific tariff is levied as a fixed charge based on per unit imported Compound This tariff is a combination of fixed amount and also amount based on the value of goods a In the first scenario the tariff is implemented to protect the domestic producers from being put out of raw material business. Hence, it is a protective tariff The tariff implemented is fixed charge of $2000 and additional 5%of total value imported, these type of tariff are compound tariff which are the combination of fixed charge and amount on the value of goods b In the second scenario, the tariff is merely for the government to earn revenue as is implemented in the budget. Hence it is revenue tariff The tariff is $ 2000 on every ton imported which is a unit tariff and therefore, it is a specific tariff

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