4.2 Types of Trade Protection

The question states the charge is fixed at $3 per kilogram, regardless of what the coffee is actually worth on the market. This 'fixed amount per physical unit' phrasing is the defining feature of one specific tariff type.

A specific tariff is a flat monetary charge applied to each unit of a good (e.g. per kilogram, per litre, per car), irrespective of the good's price. An ad valorem tariff, by contrast, is expressed as a percentage of the imported good's value, so the absolute tax rises and falls with the price.

Because the charge is **$3perkg\ast \ast anddoes\ast \ast not\ast \ast varywiththevalueofthecoffee,thisisaspecifictariff.Ifthecoffeewereworth$10/kg or $50/kg,thesame$3 charge would apply — confirming it is not percentage-based.

The correct answer is 'A specific tariff, because the charge is a fixed monetary amount per physical unit.' The other options describe a percentage-based tariff, a bilateral export agreement, or a quantity restriction — none of which match the policy described.

The question asks you to classify a trade protection measure — a $3-per-kg fixed charge on coffee imports — using the correct terminology from tariff theory.

'An ad valorem tariff, because the charge is calculated on each unit imported' is incorrect. Ad valorem tariffs are percentage-based (e.g. 15% of value). A fixed dollar charge per kilogram is not a percentage and does not scale with the good's price.

'A voluntary export restraint, because the fee is agreed with the exporting country' is incorrect. A VER is a bilateral agreement in which the exporting country limits how much it ships — it is not a per-unit fee charged at the border by the importing country.

'An import quota, because it limits the quantity of coffee that can enter the country' is incorrect. A quota sets a hard numerical ceiling on import volume. A $3/kg charge does not cap the quantity — importers can still bring in any amount as long as they pay the fixed tax per unit.

The remaining option — 'A specific tariff, because the charge is a fixed monetary amount per physical unit' — correctly identifies both the instrument (tariff) and the method of calculation (fixed sum per unit). This is the correct answer.

The pre-tariff import price is **$800\ast \ast ,andtheadvaloremtariffrateis\ast \ast 20$t = 0.20$).Thetariff-inclusivepriceisfoundusingtheformula$P_{consumer} = P_{import}(1 + t)$.

$\text{Tariff}=t\times P_{import}=0.20\times 800=\$160$ The government collects $160 on each laptop imported.

$P_{consumer}=P_{import}+\text{Tariff}=800+160=\$960$ This is the price domestic consumers must pay once the ad valorem tariff is applied.

The correct answer is **$960\ast \ast .Thelaptopnowcosts$160 more than the world price of $800, reflecting the 20% ad valorem tariff applied to its full value.

The question asks for the tariff-inclusive price of an $800laptopwitha20$800 and add it to the original price.

**$820\ast \ast impliesatariffofonly$20, which would be just 2.5% of $800 — far below the stated 20% rate. This option involves a calculation error and is incorrect.

**$1,000\ast \ast impliesatariffof$200, which would be 25% of $800, not 20%. This overstates the tariff rate and is incorrect.

**$880\ast \ast impliesatariffof$80, which is 10% of $800, not 20%. This correctly applies a percentage approach but uses the wrong rate, so it is incorrect.

**$960\ast \ast iscorrect:$0.20 \times 800 = $160$intariff,and$800 + 160 = $960$.Thisisthetariff-inclusiveprice,consistentwiththeadvaloremformula$P_{import}(1+t) = 800(1.20) = $960$.

The specific tariff is $4 per unit, and the quantity of imports after the tariff is imposed is 200,000 units per year. Tariff revenue is calculated on the actual quantity imported following the price change, not the original quantity.

$\text{Tariff revenue}=t\times Q_{imports}=4\times 200,000=\$800,000$ The government earns $4foreveryunitthatstillcrossestheborder,totalling$800,000 annually.

The correct answer is **$800,000\ast \ast .Thisistheproductoftheper-unittariff($4) and the post-tariff import volume (200,000 units). Note that if the tariff were set so high that imports fell to zero, revenue would also be zero — so revenue always depends on how many units still enter after the price increase.

The question provides a **specific tariff of $4perunit\ast \ast and\ast \ast 200,000unitsimportedpost-tariff\ast \ast .Tariffrevenue=tariffperunit\times post-tariffimportquantity.Weneedtocheckwhichoptionmatches$4 × 200,000.

**$400,000\ast \ast wouldimplyeithera$2 tariff on 200,000 units or a $4 tariff on 100,000 units — neither matches the figures given. This likely results from halving the tariff rate by mistake.

**$200,000\ast \ast wouldrequirea$1 tariff per unit on 200,000 units, or some other combination that does not match the stated $4 per unit. This is too low by a factor of four.

**$1,600,000\ast \ast implies$8 per unit on 200,000 units, or $4 per unit on 400,000 units — both inconsistent with the question. This result likely comes from doubling the tariff rate or the quantity.

**$800,000\ast \ast iscorrect:$4 \times 200{,}000 = $800{,}000$. This uses the tariff revenue formula correctly with the post-tariff import quantity.