Tariff
Tariffs are taxes on imported goods. Ad valorem tariffs are percentage taxes; specific tariffs are per-unit taxes. Both raise import prices and reduce import quantities.
Real World
The EU imposes a 10% tariff on imported cars from non-member countries — this directly raises the price of American and Japanese vehicles in Europe, shielding German and French car manufacturers like BMW and Renault from full price competition.
Exam Focus
Draw a tariff diagram only if the question explicitly asks for it; otherwise focus on identifying who gains, who loses, and the net welfare effect.
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