CA Foundation · Business Economics · International Trade
The world price of an imported electronic component is ₹500 per unit. India levies a specific tariff of ₹75 per unit. Assuming the country is small and the full tariff is passed on, the domestic price and the tariff revenue on 2,000 imported units will be:
The domestic price becomes ₹575 per unit, being the world price of ₹500 plus the ₹75 specific tariff. Tariff revenue equals ₹75 multiplied by 2,000 units, which is ₹1,50,000.
- A₹575 per unit and ₹1,50,000Correct
- B₹575 per unit and ₹1,15,000
- C₹425 per unit and ₹1,50,000
- D₹500 per unit and ₹1,50,000
Explanation
Domestic price = 500 + 75 = ₹575. Revenue = 75 × 2,000 = ₹1,50,000. Subtracting the tariff gives ₹425, which is the wrong sign. Using 575 × 2,000 = ₹11,50,000 would wrongly use the price as the revenue base, and ₹1,15,000 is not a valid figure.
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