The Basic Difference in the Economic Effects of a Tariff

question 95

Multiple Choice

The basic difference in the economic effects of a tariff compared with a quota is that a:

• A) Quota reduces domestic consumption of the product, but a tariff does not
• B) Tariff allows imports to increase if demand increases, whereas a quota does not
• C) Tariff raises product prices, but a quota does not
• D) Quota raises product prices, but a tariff does not

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Definitions:

Activity-Based Costing

A costing method that assigns costs to products or services based on the activities and resources that go into their production or delivery.

Cost Driver

A factor that influences or contributes to the expense incurred by a business activity. It is the root cause of why a particular cost occurs.

Conventional CVP Analysis

A method used in managerial accounting to understand the relationship between costs, production volume, and profits. It stands for Cost-Volume-Profit Analysis.

Contribution Margin

The amount of revenue remaining after deducting variable costs, used to cover fixed costs and generate profit.