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

• A. A form of punishment for domestic producers
• B. A subsidy given to exporters
• C. A grant provided to foreign governments
• D. A type of tax imposed on imported goods

Answer: (D)

Verified step by step guidance

1. Understand the concept of a tariff in international trade: A tariff is a tax imposed by a government on goods imported from other countries.
2. Recognize the purpose of a tariff: It is generally used to protect domestic industries by making imported goods more expensive compared to locally produced goods.
3. Differentiate tariffs from other trade-related policies: Unlike subsidies, which provide financial support to domestic producers or exporters, tariffs increase the cost of imported goods.
4. Eliminate incorrect options by matching definitions: A tariff is not a form of punishment for domestic producers, nor is it a grant to foreign governments or a subsidy to exporters.
5. Conclude that the best description of a tariff is 'A type of tax imposed on imported goods' because it directly relates to the cost added to imports to regulate trade.