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 creates a hybrid form of trade restriction a lower tariff rate for the certain quantity of imports and higher rate for quantities that exceed the quota it would be called a(n) ________.

Question

Quizplus · Accepted Answer

A tariff-quota would allow for a certain quantity of imports to enter with a lower tariff rate, while quantities that exceed the quota would face a higher tariff rate. This would incentivize trade and protect local industries at the same time. A compound tariff is when both a specific and ad valorem tariff are applied, a specific tariff is a fixed amount per unit of imported goods, and an ad valorem tariff is a percentage of the value of the imported goods, but neither of these fully address the situation outlined in the scenario.