Scenario: Badland Joins the World
Badland, a former totalitarian economy and pariah state, is taking steps toward a free market economy. The government wants to encourage trade but also wants to find a balance where local businesses and industries are not destroyed.
-If Badland chooses to levy tariffs as a percentage of the stated price of an imported product, it would be called a(n) ________.

Question

Quizplus · Accepted Answer

If Badland chooses to levy tariffs as a percentage of the stated price of an imported product, it would be called an ad valorem tariff. This type of tariff is based on the value of the imported product rather than a specific price or quantity, and is commonly used by countries looking to raise revenue while allowing for some flexibility based on market fluctuations. Compared to specific tariffs, ad valorem tariffs can be more difficult to apply consistently since they require accurate valuation of the imported goods.