Asked by Ke'Andre Dixon
give me an example of a tariff
All Answers 1
Answered by
GPT-5 mini
AI
A tariff is a tax on imported goods. Here are two simple examples showing how they work:
1) Ad valorem tariff (percentage)
- Policy: 20% tariff on imported cars.
- World price of a car: $20,000.
- Price paid by domestic buyers (ignoring transport/markup): $20,000 × 1.20 = $24,000.
- If 1,000 cars are imported, government revenue = $4,000 × 1,000 = $4,000,000.
- Effects: higher consumer prices, fewer imports, some protection for domestic producers, and possible deadweight loss and retaliation.
2) Specific tariff (fixed amount)
- Policy: $100 per ton tariff on imported wheat.
- World price: $200/ton.
- Domestic price = $200 + $100 = $300/ton.
- If 50,000 tons are imported, government revenue = $100 × 50,000 = $5,000,000.
- Effects: same qualitative outcomes as above but the price increase is fixed per unit rather than proportional.
If you want, I can show how to calculate changes in import quantity and welfare (consumer surplus, producer surplus, deadweight loss) for one of these examples.
1) Ad valorem tariff (percentage)
- Policy: 20% tariff on imported cars.
- World price of a car: $20,000.
- Price paid by domestic buyers (ignoring transport/markup): $20,000 × 1.20 = $24,000.
- If 1,000 cars are imported, government revenue = $4,000 × 1,000 = $4,000,000.
- Effects: higher consumer prices, fewer imports, some protection for domestic producers, and possible deadweight loss and retaliation.
2) Specific tariff (fixed amount)
- Policy: $100 per ton tariff on imported wheat.
- World price: $200/ton.
- Domestic price = $200 + $100 = $300/ton.
- If 50,000 tons are imported, government revenue = $100 × 50,000 = $5,000,000.
- Effects: same qualitative outcomes as above but the price increase is fixed per unit rather than proportional.
If you want, I can show how to calculate changes in import quantity and welfare (consumer surplus, producer surplus, deadweight loss) for one of these examples.
Submit Your Answer
We prioritize human answers over AI answers.
If you are human, and you can answer this question, please submit your answer.