Question

If a government wishes to impose a tariff in order to raise revenues, then will a...

If a government wishes to impose a tariff in order to raise revenues, then will a higher tariff always result in a higher revenue? Please give an explanation.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Magnitude of tariff revenue to be collected by the government depends on the elasticity of demand for the imported good on which tariff is being imposed.

If demand for the imported good is inelastic then in such case increase in price of imported good due to tariff will not result in much decrease in demand and therefore government would be able to earn substantial tariff revenue.

On the other hand, if demand for the imported good is elastic then in such case increase in price of imported good due to tariff will result in significant decrease in demand and therefore government would be able to earn small amount of tariff revenue.

So,

If a government wishes to impose a tariff in order to raise revenues, then a higher tariff will not always result in a higher revenue.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The government impose a 20%tax on the sale of milk. Given that Sam has an income...
The government impose a 20%tax on the sale of milk. Given that Sam has an income of 100 pennies, the price of milk is 5 pennies, the price of bread is 4 pennies, and Sam's utility function is U=(M)2/3(B)1/3. how much revenue will this tax raise?
If the government decides to impose a tax of 20 cents per liter on petrol, illustrate...
If the government decides to impose a tax of 20 cents per liter on petrol, illustrate the impact of the tax on market equilibrium price, and discuss whether the outcome is efficient by demonstrating the change of consumer’s and producer’s surplus as a result of tax . - Draw a demand and supply model with demand curve - Show the shift of S as a result of 20 cent tax. - Mark the price paid by consumer and received by...
1) True/False and Explain: The government presumably prefers to raise revenues in a way that creates...
1) True/False and Explain: The government presumably prefers to raise revenues in a way that creates the lowest possible deadweight loss to society. If so, the government should prefer to tax heavily those items with inelastic demands. 2) If you’re taking a test that has several questions, how should you allocate your time among the questions in order to get the highest score? (Note that which you want to maximize is your exam grade and the constraint is the amount...
Assume a local government has determined they will increase taxes in order to raise revenue to...
Assume a local government has determined they will increase taxes in order to raise revenue to support their capital improvements plans. Contrast and compare the merits of increasing property taxes versus sales taxes. Consider the various taxes which affect public budgeting in your response.
2. The government of a small open economy in the long run wishes to promote trade...
2. The government of a small open economy in the long run wishes to promote trade policies that will result in currency appreciation (increasing the real exchange rate). A) Would protectionist policies (higher tariffs and more quotas) or freer trade policies (tariff reductions and quota eliminations) be more effective in generating currency appreciation? B) Illustrate graphically the impact of the trade policy on the exchange rate of the small open economy. C) What will happen to the trade balance of...
Consider the competitive market for wheat. Suppose the government suddenly decides to impose a binding production...
Consider the competitive market for wheat. Suppose the government suddenly decides to impose a binding production quota (possibly through a system of tradable licenses which it auctions to raise government revenue). We know that this will lower the equilibrium quantity produced and raise the price relative to the market equilibrium. How would you argue that new equilibrium is inefficient? Simply point out that since it is not a free market equilibrium, it must be inefficient. Point to transaction that is...
The government has increased Vat on some commodities in order to raise revenue. The market for...
The government has increased Vat on some commodities in order to raise revenue. The market for commodity x was at equilibrium before tax at shillings 50 per unit sold and the quantity was 5000 units. Suppose own price elasticity of demand is 0.6 and the elasticity of supply is 1.1. After the government announced tax measures the new price increased to shillings 70 per unit. Calculate the equilibrium price and quantities after tax.
In theory, an increased supply of government bonds -sold to raise funds when spending exceeds revenues-should...
In theory, an increased supply of government bonds -sold to raise funds when spending exceeds revenues-should increase government borrowing costs. Theory also says big deficits crowd out business borrowing and increase private borrowing costs too. Do you agree or not and why? Thank you.
Assume you are working for the US government. The president wants your department to study the...
Assume you are working for the US government. The president wants your department to study the clothing market. The US governments need to raise revenues from the Clothing market, and you are assigned to study the cotton shirt market. You have access to the previous data: If P = 20 then Quantity demanded = 80. If P = 30 then Quantity demanded = 70. If P = 20 then Quantity supplied = 25. If P = 30 then Quantity supplied...
The government wishes to construct a bypass road at a particular point in order to ease...
The government wishes to construct a bypass road at a particular point in order to ease congestion around the town. a study is conducted that involves three groups of individuals and the following demand curves are derived. Group1; Q1=20-0.2P1 GROUP2: Q2= 35-0.5P2 GROUP3; Q3=40-0.8P3 Where q is the size of the road and p is the contribution per group. if the total cost of constructing the road is 5 billion Explain why the road may not be constructed if left...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT