Question

Often duties and taxes are imposed on cars that are imported from other countries. What types of incentives are these duties and taxes? positive incentive and subsidy. negative incentive and subsidy. positive incentive and tariff. negative incentive and tariff.

Answer 1

The right answer is the last one: negative incentive and tariff. These duties and taxes are negative incentives, or disincentives, because they attempt to discourage people from buying those cars (and buying national cars instead), and also tariffs, since they must be paid on certain classes of imports or exports.    

Answer 2

The correct option is (d) negative incentive and tariff.

Further Explanation:

Negative incentives are also known as disincentives which means to punish individuals financially for taking ‘certain action’. This is the way of encouraging ‘specific actions’ without making them obligatory or compulsory. For instance, the “Affordable Care Act” was framed with a built-in “negative economic incentive” called the “individual mandate”, which penalizes individual who does not buy “monetary insurance” with a “monetary fine” at tax time.

Those duties and taxes are “negative incentives” or “disincentives” because they discourage individuals from buying cars.

A tariff is referred to as a “tax imposed” by one nation on the ‘goods and services’ imported from another nation or country. Tariff should be paid on certain classes of exports or imports.

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Answer Details:

Grade: High School

Chapter: Negative Incentive and Tariff

Subject: Economics

 

Keywords:

negative incentive, disincentives, specific actions, monetary insurance, goods and services, export, import, tariff