Consider three goods: raw leather, leather wallets, and tanned leather. Assume that an industrial country employs a tariff structure using these ad valorem tariff rates on imports of 0%, 4.5%, and 7.9%. If this hypothetical industrial country uses a tariff structure similar to most other industrial countries, these rates will be placed on _____, _____, and ____, respectively.
A) raw leather, leather wallets, tanned leather
B) leather wallets, raw leather, tanned leather
C) raw leather, tanned leather, leather wallets
D) tanned leather, leather wallets, raw leather
E) domestic producers, importers, exporters

Question

Quizplus · Accepted Answer

Raw leather, tanned leather, and leather wallets are placed under tariffs of 0%, 7.9%, and 4.5%, respectively, following the logic of increasing complexity and value addition in the production process. Raw materials often have the lowest tariffs to encourage domestic production, followed by semi-processed goods, and finished goods have a moderate rate to protect domestic industries.

Consider Three Goods: Raw Leather, Leather Wallets, and Tanned Leather