38. A country places an annual limit on the number of organic bananas that may be imported in an effort to limit the impact on the domestic banana producers. Which type of trade barrier is the government enacting?
Answer: D
The government is enacting an absolute quota.
An absolute quota restricts the quantity of a specific good that can be imported into a country, which aligns with the country's effort to limit the number of organic bananas entering the market.
A) Ad valorem tariff
An ad valorem tariff is a tax based on the value of the imported goods, which does not limit the quantity that can be imported. Instead, it adds a cost to imports, thereby affecting the price rather than imposing strict limits on quantity.
B) Tariff quota
A tariff quota allows a certain quantity of goods to be imported at a lower tariff rate, with additional quantities subjected to a higher tariff. While this does involve limits on imports, it does not represent a strict limit as an absolute quota does.
C) Compound tariff
A compound tariff combines both a specific tariff and an ad valorem tariff. While it influences the cost of imports, it does not impose a strict limit on the number of goods that can be imported, which is the key aspect of an absolute quota.
D) Absolute quota
An absolute quota directly limits the number of organic bananas that can be imported, thereby protecting domestic producers by preventing oversupply from imports. This matches the government's action of placing an annual limit on imports.
Conclusion
The absolute quota is the most appropriate trade barrier in this context, as it specifically restricts the quantity of organic bananas allowed into the country. In contrast, the other options primarily involve taxation or different forms of quotas that do not impose a strict limit on quantities. Thus, the correct answer effectively captures the government's intent to control import levels to support domestic production.