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CA Foundation · Business Economics · International Trade

Which of the following best describes a tariff in the context of international trade?

A tariff is a government-imposed tax on goods that cross international borders. It increases the domestic price of imports, protecting local producers and generating government revenue, and is one of the most common forms of protectionist trade policy.

  1. AA complete ban on the import of certain goods into a country
  2. BA tax imposed by the government on goods crossing international bordersCorrect
  3. CAn agreement between two countries to increase mutual trade without restrictions
  4. DA voluntary reduction in production by domestic firms to protect employment

Explanation

A tariff is a specific form of trade barrier—a tax or duty levied on imported (or sometimes exported) goods. Option 0 describes a quota or embargo, not a tariff. Option 2 describes a trade agreement like a free trade zone. Option 3 is not a tariff but a voluntary industry response; tariffs are government-imposed duties with a specific monetary or percentage value.

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