Correct option is B
Correct ans. (b)
Explanation:
(A) Ad Valorem Tariff → (IV): An ad valorem tariff is levied as a fixed percentage of the value of an imported good. For instance, if a country imposes a 10% ad valorem tariff on automobiles, a car worth $20,000 would incur a $2,000 duty. This type of tariff automatically adjusts with the price of the good, ensuring proportionate taxation.
(B) Autarky → (III): Autarky is a policy or situation in which a country does not engage in international trade. It is a state of complete economic self-sufficiency. Historically, North Korea has been a prominent example of an autarkic economy.
(C) Compound Tariff → (II): A compound tariff combines both ad valorem and specific tariffs. For example, a government may impose a duty of 5% of the good’s value plus a fixed $50 per unit. This allows for both value-based and quantity-based protection.
(D) Specific Tariff → (I): A specific tariff is a fixed monetary amount charged per unit of the good, regardless of its value. For instance, $2 per kilogram of imported sugar. It does not vary with price changes, making it simple but potentially unfair when product prices fluctuate.
Information Booster
Ad valorem tariffs are flexible and rise or fall with the price of the imported item.
Autarky leads to no imports or exports, aiming at national economic self-reliance.
Compound tariffs combine the advantages of both specific and ad valorem systems.
Specific tariffs are simple to administer but may become outdated with price changes.
Ad valorem tariffs are often used for luxury goods and ensure tax proportionality.
Autarky can limit economic growth due to lack of trade and competition.
Compound tariffs are often used to protect sensitive industries from price volatility and under-invoicing.
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