CA Foundation · Business Economics · International Trade
India's domestic price of an imported good is ₹200 per unit at free trade. A specific tariff of ₹30 per unit is imposed, and the world price stays constant. Domestic output rises from 40 to 50 units and domestic consumption falls from 120 to 100 units. What is the tariff revenue collected by the government?
Imports after the tariff equal consumption of 100 units minus domestic output of 50 units, which is 50 units. Tariff revenue is 50 units times ₹30 per unit, giving ₹1,500.
- A₹2,100
- B₹3,000Correct
- C₹900
- D₹1,500
Explanation
Imports after the tariff = consumption minus domestic output = 100 - 50 = 50 units. Revenue = 50 × ₹30 = ₹1,500. Check: option 1 in this list equals ₹1,500 only at the fourth position, so the correct value is ₹1,500.
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