In an inflationary environment, then over time
A) A specific tariff will tend to raise more revenue than an ad valorum tariff.
B) An ad valorum tariff will tend to raise more revenue than a specific tariff
C) An optimum tariff will tend to raise more revenue than an escalating tariff
D) A tariff quota will tend to raise more revenue than a specific tariff.
E) an import quota would raise more revenue than a specific tariff.

Question

Quizplus · Accepted Answer

In an inflationary environment, ad valorum tariffs (which are based on the value of the goods being imported) will tend to raise more revenue than specific tariffs (which are based on a specific unit of measurement like weight or volume). This is because as prices rise due to inflation, the ad valorum tariff will also increase and generate more revenue. Specific tariffs, on the other hand, are fixed and do not adjust for inflation.

In an Inflationary Environment, Then Over Time