The Prohibitive Tariff Is a Tariff That

question 5

Multiple Choice

The prohibitive tariff is a tariff that

• A) is so high that it eliminates imports.
• B) is so high that it causes undue harm to trade-partner economies.
• C) is so high that it causes undue harm to import competing sectors.
• D) is so low that the government prohibits its use since it would lose an important revenue source.
• E) is so low that it causes domestic producers to leave the industry.

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Definitions:

Price Floor

A price floor is a government-imposed limit on how low a price can be charged for a commodity, typically implemented to protect producers' income.

Quantity Supplied

The amount of a good or service that producers are willing and able to sell at a given price over a specific time period.

Quantity Demanded

The specific amount of a good or service that consumers are willing to buy at a given price.

Quota Rent

A financial benefit obtained by importers who receive a license under a quota system which limits the quantity of goods that can be imported.