Reference: Ref 9-5 (Figure: a Tariff on Imports) Refer to the Figure

question 12

Multiple Choice

Reference: Ref 9-5 (Figure: A Tariff on Imports) Refer to the figure. Suppose the government intervenes with a $2 tariff; the total cost of the tariff to the citizens in that country is:

• A) $350 million.
• B) $400 million.
• C) $550 million.
• D) $700 million.

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Definitions:

Onerous Contract

A contract where the unavoidable costs of meeting the obligations exceed the economic benefits expected to be received from it.

Unavoidable Costs

Costs that cannot be eliminated, reduced, or postponed, and must be incurred regardless of specific business decisions or changes in operations.

Present Value Method

A technique used to determine the present value of future cash flows or income streams to evaluate investment projects or financial products.

Net Market Value

The amount that could be obtained from selling an asset in the market after deducting any selling costs or liabilities.