Future Business Leaders of America (FBLA) Business Management Practice Test

A tax on imports is commonly referred to as what?

1. A tariff

2. An embargo

3. A quota

4. Comparative advantage

The correct answer is: A tariff

A tax imposed on imports is identified as a tariff. Tariffs are used by governments to regulate foreign trade and protect domestic industries. By levying a tax on imported goods, a nation can make foreign products more expensive, which encourages consumers to buy domestically produced items. This can lead to increased local production and job preservation within the country. Other concepts mentioned, such as embargoes and quotas, serve different functions in trade. An embargo prohibits trade with a particular country, while a quota sets a limit on the quantity of a specific product that can be imported or exported during a given timeframe. Comparative advantage, on the other hand, refers to the economic principle where a country can produce a particular good or service at a lower opportunity cost than another, making these terms distinct from the concept of tariffs.