Sometimes Firms Attempt to Avoid or Lessen the Cost Effects

question 100

Multiple Choice

Sometimes firms attempt to avoid or lessen the cost effects of tariffs by

• A)reclassifying their product.
• B)increasing the VAT of their product.
• C)parallel importing.
• D)All of the above.

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Definitions:

Previously Existing Distortions

Inefficiencies or imperfections already present in a market before a new policy or change was implemented.

Distortionary Tax

A tax that causes people to alter their behavior and economic decisions from what they would have chosen in the absence of the tax.

Principle of Neutrality

The concept that certain measures, such as fiscal policies, should be designed to have a neutral effect on economic choices and competition.

Economic Decisions

Choices made by individuals, businesses, or governments regarding the allocation of scarce resources to satisfy needs and desires.