If the world price of steel is $500 a ton a specific tariff $50 is equivalent to an ad valorem tariff of______________?
Correct answer: B. 10 percent
- A. 5 percent
- B. 10 percent
- C. 15 percent
- D. 20 percent
Explanation
The equivalent ad valorem rate is the specific tariff divided by the world price: $50 ÷ $500 = 0.10, or 10 percent. Thus, a $50 per-ton tariff has the same percentage effect as a 10 percent tariff at that price.
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