Which of the Following Is the Best Example of a Tariff

question 31

Multiple Choice

Which of the following is the best example of a tariff?

• A)a limit imposed on the number of sports utility vehicles that the United States can import from Japan
• B)a subsidy granted by the U.S.government to domestic sports utility vehicle manufacturers so they can compete more effectively with foreign sports utility vehicle manufacturers
• C)a tax placed on all sports utility vehicles sold in the domestic market
• D)a $5,000 per-car fee imposed on all sports utility vehicles imported into the United States

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Definitions:

T-bills

Treasury bills, short-term debt obligations issued by the government with a maturity of less than a year, considered risk-free.

Option

A financial derivative that gives the holder the right, but not the obligation, to buy or sell an asset at a set price within a specific period.

Firm Completion

A commitment to finish a project or deliver a product by a specified date.

Asymmetric Information

Assumes managers have more complete information than investors about a firm’s prospects—can have an important effect on capital structure.